Kenya's Finance Bill 2023 to remain in effect till next hearing

Kenya is facing a challenging time as the Supreme Court of the country has intervened in the ongoing legal battle over the Finance Act 2023. Despite the Court of Appeal's ruling that declared the Act unconstitutional, the Supreme Court has issued a stay on the decision. This move allows the Finance Act 2023 to remain in effect until a full hearing is conducted on September 10th and 11th, 2024. The decision has raised questions about the impact on capital market activity and investor confidence in the country. Philip Mwangale, a Financial Analyst and Law and Governance Specialist at Gibbor Group Africa, provided insights into the legal arguments and the fiscal stability of Kenya. One of the key legal arguments in the case is whether public interest favors granting a stay on the Court of Appeal ruling or allowing the determination to take immediate effect. The Supreme Court granted conservatory interim orders, putting the decision of the Court of Appeal on hold. This decision comes after the government side, seeking a stay of the Court of Appeal ruling, argued that the public would bear the burden of unconstitutional taxes if the Finance Act 2023 was not upheld. The Supreme Court's ruling reflects a tilt in public interest towards maintaining the operational status of the Finance Act 2023. The fiscal stability of Kenya is also under scrutiny, with concerns about credit ratings and alternative ways for the government to meet its budgetary needs. Philip Mwangale pointed out that Kenya's governance in handling the legal challenges related to the Finance Act has been lacking. The government's delay in addressing the issues raised in the legal proceedings has led to a situation where taxes have already been imposed and collected. Mwangale criticized the government for not taking timely action to rectify the situation and highlighted the need for better governance practices. The financial implications of the ongoing legal battle are significant, with the International Monetary Fund (IMF) playing a crucial role in pushing for higher taxes in Kenya. The IMF's emphasis on fiscal sustainability and the receipt of bailouts has put pressure on the government to increase taxes as a means of stabilizing the economy. Mwangale emphasized the importance of public participation and adherence to legal steps in public finance management to ensure democratic and transparent economic policies. As Kenya prepares for the substantive hearing in September, the fate of the Finance Act 2023 hangs in the balance. The Supreme Court's intervention has postponed a final decision on the Act's constitutionality, raising concerns among investors and market participants about the country's financial stability. The ongoing legal battle underscores the need for effective governance and transparency in Kenya's economic policies to maintain investor confidence and ensure sustainable fiscal practices.