Mbadi plans PAYE exemption for workers earning KSh32,800 or less

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Employees earning KSh32,800 a month or less would stop paying Pay As You Earn (PAYE) tax under an amendment the National Treasury plans to take to Parliament in November, Cabinet Secretary John Mbadi has said.

Mbadi made the announcement on Friday at The Eldoret National Polytechnic in Uasin Gishu County, where he opened the Mashujaa Day 2026 Economy (Finance) Thematic Week, according to the Kenya News Agency. The week is running under the theme “An Economy for the People”.

“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,” Mbadi said.

The proposal is not yet law. Mbadi did not say what the exemption would cost in lost revenue. Workers who want to see how much PAYE they currently pay can run their gross salary through the PAYE calculator on JobinKenya or the BusinessRadar tax calculators.

Growth target and the cost of fuel relief

Mbadi tied the tax plan to what he described as a recovering economy. He said output grew by 5.1 per cent in both the first and second quarters of 2026, up from 4.6 per cent in 2025, and that the government wants to hold growth at about five per cent to create jobs for young people. The second-quarter figure was published by the Kenya National Bureau of Statistics on Friday.

“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.

On prices, the CS blamed the recent rise in inflation on higher transport costs, more expensive wheat and lower milk production linked to the long dry spell.

He put a figure on the decision to keep VAT on fuel at eight per cent, half the standard 16 per cent rate, which the government has extended for another 90 days. The relief has cost about KSh54 billion in revenue over six months, Mbadi said, and the bill would pass KSh100 billion over a full year if it stayed in place.

“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.

Reserves, borrowing costs and the infrastructure fund

Mbadi listed several indicators he said showed the economy had stabilised:

• Foreign exchange reserves rose from 2.3 months of import cover in 2022 to 6.1 months.
• Government borrowing costs fell from about 16 per cent to below nine per cent.
• Average commercial bank lending rates to the private sector dropped from 17.2 per cent to 14.4 per cent.
• The value of companies listed on the Nairobi Securities Exchange rose from about KSh1.4 trillion at the end of 2023 to more than KSh4.1 trillion.
• Pension assets grew from KSh1.8 trillion at the end of 2023 to KSh3.17 trillion in June 2026.

He said proceeds from the Kenya Pipeline Company transaction and the partial sale of the government’s Safaricom shares had raised more than KSh310 billion for the National Infrastructure Fund, and that over 70,000 Kenyans became shareholders through the deals. The fund is meant to back projects such as the expansion of Jomo Kenyatta International Airport and the Nairobi-Mombasa highway through partnerships with private investors.

The CS also said the 253-kilometre South Rift Lake Region Gateway Corridor, which will run through Nakuru, Kericho, Bomet, Narok and Migori counties, had been finalised with the World Bank. Funding is expected next month and the project is due for launch before the end of the year, he said.

Mbadi admitted that many households are still struggling despite the better numbers. “Our task in the next phase, together with my team, is to turn stability into prosperity that every household can feel,” he said.