Mbadi Proposes PAYE Exemption for Workers Earning Below Sh32,800

Treasury Cabinet Secretary John Mbadi has announced plans to exempt workers earning Sh32,800 or less a month from Pay As You Earn (PAYE) tax, in a proposed move aimed at easing pressure on low-income households.

Mbadi said the government intended to introduce an amendment to Parliament in November. If approved, the proposal would offer tax relief to workers struggling with the cost of living.

Speaking on Friday at The Eldoret National Polytechnic in Uasin Gishu County, during the opening of the Mashujaa Day 2026 Economy (Finance) Thematic Week, Mbadi said the move would recognise the contribution Kenyans had made towards the country's economic recovery.

“In the month of November, we are bringing that amendment to Parliament to tell those Kenyans that we appreciate the sacrifices, however little or however big you have made,” he said.

The proposal is yet to be presented to Parliament, and its implementation will depend on the legislative process.

Government targets economic growth

Mbadi also said the government was aiming to sustain economic growth at about five per cent, with job creation, particularly for young people, among its priorities.

He reported that Kenya's economy grew by 5.1 per cent in both the first and second quarters of 2026, compared with 4.6 per cent in 2025.

The Treasury chief attributed the improvement to measures taken to stabilise the economy amid external pressures, including currency market volatility and rising international fuel prices.

“It is my firm commitment that we are going to do whatever is possible that we can do to make sure that we steady our economy at about 5% to be able to create job opportunities for our young people,” he said.

However, the government faces the challenge of ensuring that stronger economic indicators translate into tangible improvements for households.

Mbadi acknowledged that many Kenyans were still experiencing financial difficulties, despite improvements in several areas of the economy.

Fuel prices and cost of living

The CS attributed inflationary pressures to higher transport costs, rising wheat prices and lower milk production linked to prolonged dry conditions.

He said the government had retained VAT on fuel at eight per cent for another 90 days, compared with the standard rate of 16 per cent, to cushion consumers against rising international fuel prices linked to the conflict in the Middle East.

According to Mbadi, the tax relief had cost the government about Sh54 billion in foregone revenue over six months. The figure could exceed Sh100 billion over a full year if the measure continued.

“Every Kenyan feels this, from the boda boda rider and the mama mboga, to the farmer taking maize to market and the family that cooks with kerosene,” he said.

He added that the government's next priority was to ensure economic stability improved people's daily lives.

“Our task in the next phase, together with my team, is to turn stability into prosperity that every household can feel,” he said.

Treasury points to improved financial indicators

Mbadi said Kenya's foreign exchange reserves had risen from 2.3 months of import cover in 2022 to 6.1 months, improving the country's ability to meet external obligations and withstand economic shocks.

He also reported that government borrowing costs had fallen from about 16 per cent to below nine per cent. Average commercial bank lending rates to the private sector had declined from 17.2 per cent to 14.4 per cent.

The CS further said the value of companies listed on the Nairobi Securities Exchange had increased from about Sh1.4 trillion at the end of 2023 to more than Sh4.1 trillion.

He added that proceeds from the Kenya Pipeline Company transaction and the partial sale of the government's Safaricom shares had raised more than Sh310 billion for the National Infrastructure Fund.

The fund is expected to support major projects, including the expansion and modernisation of Jomo Kenyatta International Airport and the Nairobi-Mombasa Highway, through partnerships with private investors.

Mbadi also reported that pension assets had grown from Sh1.8 trillion at the end of 2023 to Sh3.17 trillion in June 2026.

Major road projects planned

The Treasury CS outlined several road projects intended to improve transport links, support trade and stimulate economic activity.

They include the Rironi-Mau Summit Road, the Mau Summit-Eldoret-Malaba highway, the South Rift Lake Region Gateway Corridor, the Great Highlands Connections Corridor and the Lake Victoria Ring Road.

Mbadi said the 253-kilometre South Rift Lake Region Gateway Corridor had been finalised with the World Bank. Funding was expected the following month, with construction scheduled for launch before the end of the year.

The road is expected to pass through Nakuru, Kericho, Bomet, Narok and Migori counties.

In northern Kenya, he cited the 740-kilometre Isiolo-Wajir-Mandera road as a major project under construction. He also highlighted a 245-kilometre economic corridor linking Biretwo, Aror and Chesongoch in Elgeyo Marakwet County, funded by the African Development Bank.

Mbadi urged Kenyans attending the thematic week to learn more about tax compliance, government bonds, pension schemes and how to identify fraudulent investment opportunities.

The event forms part of activities leading up to the 2026 Mashujaa Day celebrations and is intended to encourage public participation in discussions about the country's economic future.