Highlights of the 2021/2022 Budget Statement



The Kenyan national budget statement for fiscal year 2021/2022 was presented to the National Assembly on Thursday, 10th June 2021. This is the ultimate budget to be implemented by the Jubilee administration, whose term ends in August 2022. The budget statement presents the national treasury with a delicate balancing act between funding President Uhuru Kenyatta’s capital-intensive legacy projects and increasing tax collections from a Covid-19 ravaged economy.

The National Treasury is seeking a 6.6% economic growth through the measures in the budget statement themed “Building Back Better: Strategy for Resilient and Sustainable Economic Recovery and Inclusive Growth.” The economic recovery will be reinforced by the ongoing implementation of the strategic priorities of the Government under the “Big Four” Agenda and Economic Recovery Strategy.

In this circular, we present brief highlights of the Economic Outlook, Sectoral Spending Priorities and Proposed Taxation Policy Measures as contained in the 2021/2022 Budget Statement as presented by the Cabinet Secretary for the National Treasury, Ukur Yatani.

This publication constitutes only a brief guide and is not intended to be a comprehensive summary of the budget statement. While all reasonable care has been taken in the preparation of this guide, HLB Cezam accepts no responsibility for any errors it may contain, whether caused by negligence or otherwise, or for any loss, however caused or sustained by any person that relies on it.


The adverse effects of the Covid-19 outbreak have disrupted the global economic performance. All major economies contracted in 2020 except China, which is estimated to have expanded by 2.3%. The 2021/22 budget has been prepared against a background of projected economic recovery.

1.     Global Economic Outlook

The global economy is projected to grow by 6% in 2021. The global economic performance is estimated to have contracted by 3.3% in 2020 compared to a growth of 2.8% in 2019.

2.    African Economic Outlook

The African regional economy is projected to grow by 3.4% in 2021. The African region economic performance is estimated to have contracted by 1.9% in 2020 compared to a growth of 3.2% in 2019.

3.    East African Community Economic Outlook

The East African Community (EAC) economy is projected to grow by 5.1% in 2021. The EAC economic performance is estimated to have contracted by 0.3% in 2020 compared to a growth of 6% in 2019.

4.    Kenyan Economic Outlook

The Kenya National Bureau of Statistics (KNBS) has delayed the release of the annual economic survey that was to reveal the full extent of damage inflicted on the economy from the Covid-19 containment measures. Typically, the report is released in late April or early May and was to capture the economic performance in a year when Kenya imposed restrictions and containment measures to curb the spread of Covid-19.

The KNBS also delayed release of the real Gross Domestic Product (GDP) data for second and third quarters of 2020. The report for the second quarter was released on 15th October as opposed to the typical 30th September, while that for the third quarter was published on 27th January, this year, as opposed to 31st December 2020.

According to the 2020 GDP data released by KNBS, the economic performance of the first quarter of 2020 was a growth of 4.9%, while the economic performance of the second and third quarters contracted by 5.7% and 1.1% respectively. In the absence of the official KNBS GDP data, Kenya is estimated to have registered an average GDP growth of 0.6% in 2020. By comparison, the GDP grew by 5.4% in 2019 and 6.3% in 2018.

The Kenyan economic growth is expected to rebound to 6.6% in 2021, reflecting optimism of economic performance recovery after the reopening of the economy.


The total expenditures in the FY 2021/22 budget are projected at Ksh 3.03 trillion equivalent to 24.5% of GDP, up from Ksh 2.89 trillion equivalent to 25.8% of GDP in the FY 2020/21 budget. Recurrent expenditures will amount to Ksh 2 trillion or 16.2% of GDP. On the other hand, development expenditures including foreign financed projects, allocation to Contingencies Fund and conditional transfers to County Governments are projected at Ksh 669.6 billion equivalent to 5.4% of GDP.

The fiscal deficit for the FY 2021/22 budget is projected at Ksh 929.7 billion equivalent to 7.5% of GDP. The fiscal deficit in FY 2021/22 budget will be financed through net external borrowing of Ksh 271.2 billion equivalent to 2.2% of GDP and net domestic borrowing of Ksh 658.5 billion equivalent to 5.3% of GDP. The increase in domestic borrowing will accelerate the crowding out of the private sector that is in dire need of credit to stimulate the economic performance.

The implementation of the “Big Four” Agenda remains a high priority and a critical driver of economic recovery. In this regard, the Government will fast track implementation of programs and projects under the “Big Four” Agenda to enhance food and nutrition security; achieve universal healthcare; provide affordable housing; and support growth of manufacturing sector for job creation.  The Big Four has been allocated Ksh 142.1 billion. This includes Ksh 60 billion for Food and Nutrition Security, Ksh 47.7 billion for Universal Health Coverage, Ksh 20.5 billion for Manufacturing and Ksh 13.9 billion for Affordable Housing.

The government has also set aside Ksh 23.1 billion for continuation of the Economic Stimulus Programme implementation in the FY 2021/22, which targets to cushion vulnerable citizens and businesses particularly those affected by the Covid-19 Pandemic.

The highlights of the proposed sectoral spending priorities are as follows:

1.     Agriculture and food security

To support the aspirations of 100% food and nutrition security, the government has proposed an allocation of Ksh 60 billion for relevant food and nutrition security programs. The highlights of key allocations to the sector is as follows:


  • Ksh 7 billion will go to the National Agricultural and Rural Inclusivity Project;
  • Ksh 2.7 billion for the Kenya Cereal Enhancement Programme;
  • Ksh 1.8 billion for the Emergency Locusts Response;
  • Ksh 1.5 billion for the National Value Chain Support Programme;
  • Ksh 1.5 billion for the Agricultural Sector Development Support Programme II;
  • Ksh 1.5 billion for the Small Scale Irrigation and Value Addition Project; and
  • Ksh 620 million for the Food Security and Crop Diversification Project.


  • Ksh 488.1 million for the Regional Pastoral Livelihood Resilience Project;
  • Ksh 455 million for the Kenya Livestock Commercialization Programme; and
  • Ksh 690 million for the Livestock Value Chain Support Project and Initiatives.

 Blue Economy  

  • Ksh 3.2 billion for the Aquaculture Business Development Project;
  • Ksh 3.4 billion for Kenya Marine Fisheries & Socio-Economic Development Project;
  • Ksh 2.1 billion for Exploitation of Living Resources under the Blue Economy;
  • Ksh 1 billion for construction of Fish Processing Plant in Lamu; and
  • Ksh 962 million for other Development of Blue Economy Initiatives.

Other Key Allocations in the Agriculture Sector 

  • Ksh 8.9 billion for the Climate Smart Agricultural Productivity Project;
  • Ksh 3 billion for Free Disease Holding Ground in Lamu.
  • Ksh 1.5 billion for Processing and Registration of Title deeds;
  • Ksh 1.1 billion to enhance drought resilience and sustainable livelihood;
  • Ksh 529.5 million for the Livestock and Crop Insurance Scheme; and
  • Ksh 705 million for Construction and Digitization of Land Registries.

2.    Health sector

To provide universal health coverage to guarantee quality and affordable health to all Kenyans, among other initiatives, the government has proposed an allocation of Ksh 121.1 billion to the health sector. The highlights of key allocations to the sector is as follows:

  • Ksh 14.3 billion for the rollout of covid-19 vaccines to create herd immunity;
  • Ksh 8.7 billion for the Kenya COVID-19 Emergency Response Project;
  • Ksh 7.2 billion for the Managed Equipment Services;
  • Ksh 5.8 billion for HIV/AIDS, Malaria and tuberculosis programmes;
  • Ksh 4.1 billion for Free Maternity Health Care;
  • Ksh 9 billion to enhance vaccines and immunizations programme;
  • Ksh 1.8 billion to provide medical cover for the elderly and severely disabled persons;
  • Ksh 15.2 billion for the Kenyatta National Hospital;
  • Ksh 11.5 billion for the Moi Teaching and Referral Hospital;
  • Ksh 7.3 billion for the Kenya Medical Training Centres;
  • Ksh 2.8 billion for the Kenya Medical Research Institute; and
  • Ksh 1.3 billion for the Construction of Kenya National Hospital Burns and Pediatrics Centre.

3.    Manufacturing sector

To promote local industries for job creation, the government has proposed an allocation of Ksh 20.5 billion under various implementing Ministries, Departments and Agencies (MDAs). The highlights of key allocations to the sector is as follows:

  • Ksh 2 billion additional for Credit Guarantee Scheme to enhance access to affordable credit by Micro, Small and Medium Enterprises(MSMEs) in the manufacturing sector;
  • Ksh 8.3 billion for Dongo Kundu Special Economic Zone;
  • Ksh 1.4 billion for the Kenya Industry and Entrepreneurship Project;
  • Ksh 800 million for the Kenya Youth Employment and Opportunities Project;
  • Ksh 448 million for Industrial Research Laboratories;
  • Ksh 5 million for Constituency Industrial Development Centres;
  • Ksh 500 million to support development of various MSMEs in Kenya;
  • Ksh 600 million for provision of finances to MSMEs through the Kenya Industrial Estate;
  • Ksh 440 million for the development of the Special Economic Zone Textile Parks; and
  • Ksh 800 million for access roads to industrial park facilities.

4.    Housing sector

To achieve the ambitious promise of delivering 500,000 affordable and decent housing units to Kenyans, the government has proposed an allocation of Ksh 13.9 billion for the Affordable Housing Programme. The highlights of key allocations to the sector is as follows:

  • Ksh 8.2 billion for construction of Affordable Housing Units;
  • Ksh 3.5 billion for Kenya Mortgage Refinance Company (KMRC) capital enhancement;
    • KMRC to issue an infrastructure bond by October 2021 to raise additional financing;
    • KMRC to issue Green Bonds to finance climate friendly housing projects;
  • Ksh 3.5 billion for Kenya Informal Settlement Improvement Project-Phase II;
  • Ksh 1 billion for maintenance of Government Pool Houses;
  • Ksh 750 million for the Housing Units of the National Police and Kenya Prison; and
  • Ksh 500 million for construction of Social Housing Units.

5.    Infrastructure

The government has proposed an allocation of Ksh 182.5 billion for expansion of critical infrastructure in roads, railways, sea and airports to create an enabling environment for economic recovery and employment creation. The highlights of key allocations to the sector is as follows:

Roads Construction 

  • Ksh 94.7 billion for ongoing Road and Bridges Construction;
  • Ksh 36.1 billion for Rehabilitation of Roads; and
  • Ksh 54 billion for Maintenance of Roads.

Rail and Ports Construction 

  • Ksh 27.2 billion for Phase II of the Standard Gauge Railway;
  • Ksh 2 billion for rehabilitation of Naivasha Inland Container Depot - Malaba Line;
  • Ksh 2 billion for construction and rehabilitation of Riruta/Lenana - Ngong Railway;
  • Ksh 1.1 billion for rehabilitation of the Nairobi-Nanyuki Meter Gauge Railway Line;
  • Ksh 700 million for rehabilitation of the Nakuru-Kisumu Meter Gauge Railway;
  • Ksh 1.3 billion for Railways Metro Lines;
  • Ksh 2 billion for Kenya National Ship Yard;
  • Ksh 7.5 billion for the construction of the Mombasa Port Development Project; and
  • Ksh 7.5 billion for the LAPSSET Project.

6.    Energy sector

To support generation of adequate and affordable energy, the Government has allocated Ksh 71.9 billion to the sector. The highlights of key allocations to the sector is as follows:

  • Ksh 50.1 billion for transmission and distribution of power;
  • Ksh 11.3 billion for development of geothermal energy;
  • Ksh 6.4 billion for electrification of public facilities; and
  • Ksh 3 billion for development of nuclear energy as well as exploration and mining of coal.

7.    Education sector

To enhance quality and relevant of education, the government has made the following allocations towards the education sector:

  • Ksh 281.7 billion for Teachers Service Commission (TSC);
  • Ksh 76.3 billion for University Education;
  • Ksh 62.2 billion for Free Day Secondary Education;
  • Ksh 15.8 billion to the Higher Education Loans Board;
  • Ksh 12 billion will cater for Free Primary Education;
  • Ksh 5.8 billion for Kenya Secondary Education Quality Improvement Project;
  • Ksh 2.5 billion for recruitment of teachers;
  • Ksh 4 billion for examinations fee waiver for all class eight and form four candidates;
  • Ksh 4.2 billion for Primary and Secondary schools’ infrastructure;
  • Ksh 8 billion for construction and equipping of Technical Training Institutes;
  • Ksh 1.8 billion for the School Feeding Programme;
  • Ksh 1 billion for the Competency Based Curriculum; and
  • Ksh 7 billion for Technical and Vocational Education and Training (TVET) initiatives.

8.    Tourism and hospitality sector

To stimulate the recovery of tourism, sports, culture, recreation and arts from the ravaging effects of Covid-19 pandemic, the government has made the following allocations towards the sector:

  • Ksh 15 billion for the Sports, Arts and Social Development Fund;
  • Ksh 1.7 billion for the Tourism Fund;
  • Ksh 643 million for Tourism Promotion Fund; and
  • Ksh 90 million for refurbishment of the regional stadia.

9.    Environmental, water and natural resources

To expand access to clean and adequate water for domestic and agricultural use, promote environmental protection and support natural resources conservation, the government has made the following allocations towards the sector:

  • Ksh 38 billion for water and sewerage infrastructure development;
  • Ksh 4 billion for water resources management;
  • Ksh 10.8 billion for water storage and flood control;
  • Ksh 10.5 billion for irrigation and land reclamation;
  • Ksh 1.6 billion for water harvesting and storage for irrigation;
  • Ksh 9.6 billion for forests and water towers conservation;
  • Ksh 3.3 billion for environment management and protection;
  • Ksh 1.4 billion for Meteorological Service; and
  • Ksh 8.2billion for wildlife conservation and management.

10.  Security

To improve security and create an enabling environment for business to thrive while aiding faster economic recovery, the government has allocated Ksh 294.5 billion to support operations of the security agencies. The highlights of key allocations is as follows:

  • Ksh 119.8 billion for Defence;
  • Ksh 110.6 billion for Policing and Prisons Services;
  • Ksh 42.5 billion for the National Intelligence Service; and
  • Ksh 10.7 billion for leasing of police motor vehicles.

11.   Social protection

To cushion the vulnerable segment in the society the government has proposed an allocation of Ksh 37.8 billion for social protection and affirmative actions. The highlights of key allocations is as follows:

  • Ksh 16.7 billion for cash transfers to elderly persons;
  • Ksh 7.9 billion for Orphans and Vulnerable Children;
  • Ksh 1.2 billion for persons living with severe disabilities;
  • Ksh 4.1 billion for the Kenya Hunger Safety Net Programme;
  • Ksh 3.7 billion for the Kenya Development Response to Displacement Impact Project;
  • Ksh 2.7 billion for the Kenya Social and Economic Inclusion Project;
  • Ksh 933.8 million for the Child Welfare Society of Kenya;
  • Ksh 400 million for the Presidential Bursary for the orphans; and
  • Ksh 200 million for National Development Fund for Persons living with Disabilities.

12.  Equity, poverty reduction, women and youth empowerment

To empower the youth and support businesses owned by youth, women and persons living with disabilities, the government has made the following allocations to the segment in the society:

  • Ksh 10 billion for the National Youth Service;
  • Ksh 4.2 billion for the Kenya Youth Empowerment and Opportunities Project;
  • Ksh 1 million for the Youth Enterprise Development Fund;
  • Ksh 120 million for the Women Enterprise Fund;
  • Ksh 62 million for the Youth Employment and Enterprise Fund;
  • Ksh 41.7 billion for the National Government Constituency Development Fund (CDF);
  • Ksh 2.1 billion for the National Government Affirmative Action Fund; and
  • Ksh 6.8 billion for the Equalization Fund to finance programmes in marginalized areas.

13.  Digitizing the economy

To leverage on rapid technological advancements to catalyse economic recovery, create jobs and improve lives and livelihoods of Kenyans, the government has proposed an allocation of Ksh 20.9 billion to fund initiatives in the Information, Communication and Technology sector. The highlights of key allocations is as follows:

  • Ksh 1 billion for Government Shared Services;
  • Ksh 670 million for the Digital Literacy Programme;
  • Ksh 12 billion for the Konza Technopolis City, Horizontal Infrastructure Phase;
  • Ksh 3.6 billion for Konza Data Centre and Smart City Facilities;
  • Ksh 400 million for construction of Konza Complex Phase 1 B;
  • Ksh 200 million for development of Konza Technopolis Masterplan;
  • Ksh 1.1 billion for installation and commissioning of Eldoret-Nadapal Fibre Optic Cable;
  • Ksh 1.2 billion for rehabilitation of the National Optic Fibre Backbone Phase II Cable; and
  • Ksh 463 million for rehabilitation of Last Mile County Connectivity Network.

14.  Ethics and governance

To enhance good governance and scale up the fight against corruption the government has made the following allocations towards the relevant agencies:

  • Ksh 3.3 billion for the Ethics and Anti-Corruption Commission;
  • Ksh 3.2 billion for the Office of the Director of Public Prosecutions;
  • Ksh 7.6 billion for the Criminal Investigations Services;
  • Ksh 5.9 billion for the Office of the Auditor General;
  • Ksh 37.9 billion for Parliament (National Assembly and Senate); and
  • Ksh 17.9 billion for the Judiciary.

15.  County governments

To support the devolution agenda, the transfers to County Governments are as follows:

  • Ksh 370 billion as equitable share representing 3% of the most recent audited and approved revenue raised nationally in line with Article 203 (2) of the Constitution;
  • Ksh 7.5 billion as conditional allocations from the National Government share of revenue;
  • Ksh 32.3 billion from development partners;
  • Ksh 6.8 billion under the Equalization Fund; and
  • Ksh 27.2 billion for the Nairobi Metropolitan Services.


The total revenue including Appropriations-in-Aid and grants for the FY 2021/22 budget is projected at Ksh 2.1 trillion, equivalent to 17% of GDP. The ordinary revenue in the budget is projected at Ksh 1.78 trillion, equivalent to 14.3% of GDP.

The composition of the Ksh 1.78 trillion ordinary revenue projection is as follows; Income Tax – Ksh 834.5 billion, VAT – Ksh 472.9 billion, Import Duty – Ksh 119 billion, Excise Duty – Ksh 241 billion, MDA Fees – Ksh 263 billion, Investment Income – Ksh 30 billion and Other Incomes – Ksh 78.2 billion. The government has always missed on projected revenue collections in the past fiscal years, it remains to be seen if the ambitious projection shall be achieved.

To realize the ambitious revenue collection projection, the Finance Bill, 2021 proposes amendments to various tax laws that are expected to generate an additional Ksh 8.7 billion to the exchequer for the FY 2021/22.  The proposed amendments to the Finance Bill, 2021 are highlighted herein below:


1.     Income Tax

The highlights of the income tax measures introduced by the Finance Bill, 2021 are as follows:

  • Removal of limitation for carrying forward of losses under Section 15(4) of income Tax Act;
  • Thin capitalization rule changed from debt-to-equity ratio to 30% of earnings before interest, taxes, depreciation and amortization (EBITDA);
  • National Health Insurance Fund contribution to qualify for 15% insurance relief;
  • Tax rebate extended to employers engaging TVET graduates as apprentice;
  • Investment allowance will now be computed on a straight-line basis; and
  • Management and professional fees under the extractive sector harmonized with service fees, in the same sector, at 10%.


2.    Value Added Tax (VAT)

The highlights of the VAT measures introduced by the Finance Bill, 2021 are as follows:

  • VAT exemption on Health Products and Technologies to boost health sector;
  • VAT exemption on goods used in geothermal, oil and mining projects;
  • VAT exemption on equipment for generation of solar and wind energy;
  • Transitional VAT exemption on goods used in power generation under power purchase agreements;
  • VAT exemption for asset transferred to Real Estate Investment Trusts and Asset Backed Securities; and
  • Bread to attract VAT at 16% instead of being both exempt and zero-rated.

3.    Customs

The highlights of the Custom measures introduced by the Finance Bill, 2021 are as follows:

  • Finished iron and steel products to be imported at 25% or corresponding specific rate;
  • Import duty on leather and footwear products at 25% or corresponding specific rate;
  • Unassembled motorcycles at 10% under Duty Remission Scheme;
  • Inputs used in textile and apparel sector at 0% under the Duty Remission Scheme;
  • Import duty on furniture products at 35% duty rate; and
  • Inputs for manufacture of baby diapers at 0% under Duty Remission Scheme.

4.    Excise Duty

The highlights of the Excise Duty measures introduced by the Finance Bill, 2021 are as follows:

  • Rebate on excise duty paid on internet data services purchased in bulk for resale;
  • Excise duty on locally manufactured sugar confectionary and white chocolate;
  • Removed excise duty on imported glass bottles;
  • Changed excise duty rate on Motorcycles from Ksh 11,608.23 per unit to 15%;
  • Excise duty on nicotine pouch at Ksh 5,000 per kg; and
  • Excise duty on betting at 20% of amount wagered.

5.    Miscellaneous Fees and Levies

The highlights of the Fees and Levies measures introduced by the Finance Bill, 2021 are as follows:

  • Import Declaration Fee (IDF) and Railway Development Levy (RDL) exemption on goods in imported public interest, or to promote investment above Ksh 5 billion.

6.    Tax Administration

The budget statement proposes the introduction of the following tax administration procedures:

  • The introduction of National Policy to Support Enhancement of County Governments’ to enhance Own-Source Revenue and reduce over-reliance on equitable share;
  • The Government through a multi-agency taskforce proposes the deployment of one Integrated County Revenue Management System for use by all the 47 County Governments;
  • To ease tax administration, the Tax Procedures Act, 2015 is to be amended, to facilitate the implementation of the Multilateral Convention for Mutual Administrative Assistance in Tax Matters (MAC) ratified by Kenya and deposited with the Global Forum on Transparency and Exchange of Information on Tax Matters in July 2020;
  • To strengthen the Tax Appeals Tribunal and allow members of the Tribunal to expeditiously hear and conclude cases, the National Treasury has proposed various amendments to the Act through the Tax Appeals Tribunal (Amendment) Bill, 2021 which has been submitted to the National Assembly for consideration;
  • The Government automated the EAC Duty Remission process, under the Single Window System, and successfully rolled out in September 2020;
  • To strengthen the administration of tax exemption process for Official Aid Funded projects, the government has embarked on automation of the application and approval under the Single Window System and target to roll out in the next financial year;
  • The National Treasury has initiated a process of developing a National Tax Policy Framework that will not only enhance administrative efficiency of the tax system but also provide consistency and certainty in tax legislation and management of tax expenditure. A draft National Tax Policy is now ready and will be shared with stakeholders and members of the public in line with the dictates of our constitution before forwarding to the National Assembly for consideration and approval.


Discussions by the Finance and Planning Committee of the National Assembly as well as Public Participation have been conducted. The National Assembly will now approve the Budget Appropriation Bill, 2021 and the Finance Bill, 2021 and forward for assent by the President into law by 30th June 2021, to facilitate the implementation of the changes taking effect on 1st July 2021.

Please do not hesitate to contact us, should you require further clarification on the 2021/2022 Budget Statement and the Finance Bill, 2021.

Moses Mwendwa              Managing Director                             mmwendwa@czmkenya.com

Benson Njiru                     Director, Advisory & Tax                  benson.njiru@czmkenya.com

Betty Komen                      Tax Associate                                        bettykomen@czmkenya.com