Kenya's Ruto says government will draft another finance bill

In a recent development, President William Ruto's administration has announced plans to revisit the drawing board and draft a new finance bill to support the country's budget. Speculation is rife that the Finance Ministry may reintroduce several tax measures that were previously dropped due to weeks of deadly protests. To shed light on these developments and provide insights on the potential outcomes, CNBC Africa recently interviewed Declan Galvin, the Managing Director at Exigent Advisory. Galvin highlighted the challenges faced by the government in balancing the need to generate revenue without compromising service delivery or upsetting businesses and the public. The options of cutting spending, increasing taxes, or borrowing more all come with their own sets of consequences. As the Treasury Secretary John Abadie considers various provisions for the new bill, consultations with entities like the International Monetary Fund (IMF) are underway with a deadline set for the 30th of September. One of the contentious tax measures under consideration is the 'eco levy,' a micro-pollution and waste management tax aimed at promoting environmental sustainability. While the levy aligns with global climate goals, concerns have been raised about its impact on the entire value chain and consumer goods. Multinational corporations operating in Kenya may face operational challenges and sustainability issues due to the levy, raising questions about the support mechanisms available for international investors. Galvin emphasized the importance of finding a balance between environmental regulations and revenue collection, acknowledging the government's efforts in waste management over the years. Despite potential resistance to the eco levy, he suggested exploring financial and tax incentives to ease the burden on businesses and encourage capital investments. The reintroduction of previously dropped tax measures has sparked market anxiety, given the current economic challenges in Kenya. However, Galvin noted a sense of cautious optimism among stakeholders, recognizing the need for change following the public outcry and demonstrations in June. The administration's ability to navigate these sensitive issues while maintaining market stability will be crucial to avoiding further backlash. In conclusion, achieving a delicate equilibrium between revenue generation, environmental sustainability, and investor confidence will be paramount for the Ruto administration as it crafts the new finance bill. With public sentiment and market dynamics in flux, the government's approach in the coming weeks will be closely scrutinized for its impact on Kenya's economic trajectory.