Why Treasury Has Blocked the Use of KRA Refunds to Settle Outstanding Taxes

Hello and welcome to the Money News Roundup Newsletter. Today, we’re covering the move by the National Treasury to block Kenyans from using refunds to pay outstanding dues. We also cover the growth of the NSE.

‍Treasury Blocks Plan Allowing Kenyans to Pay Tax Dues Using Refunds 

The Treasury has blocked the Kenya Revenue Authority (KRA) from implementing part of the Finance Act 2025 that allowed taxpayers to offset tax dues using refunds from overpaid taxes.

The Act, effective July 1, 2025, had amended Section 47 of the Tax Procedures Act to permit offsets against taxes like import VAT. 

As reported by the Business Daily, the National Treasury opposed these changes, citing concerns over revenue impact and advised KRA against updating its iTax system.

While the amendments aimed to support business cash flow, the Treasury clarified that offsets under Section 47(1)(a) only apply to taxes directly borne by the taxpayer—not withheld taxes like Withholding VAT or Income Tax—limiting the benefit and excluding third-party tax liabilities remitted by agents.

“Withholding taxes are an administrative obligation of the withholding agent who collects tax from another party and remits it to KRA. The actual liability rests with the payer (employee in case of Paye, supplier or service provider) and not the withholding agent.” Treasury stated.

KCB to Inject Ksh4B into Tanzanian Unit to Boost Growth

KCB Group plans to inject up to Ksh4 billion into its operation in Tanzania to boost growth, using proceeds from the Ksh14.2 billion sale of National Bank of Kenya (NBK) to Nigeria’s Access Bank. 

The recapitalization aims to strengthen KCB Tanzania, which currently operates with a thin capital buffer—just 0.4 percent above the regulatory minimum of 14.5 percent

KCB, which ranks tenth in Tanzania with an asset base of Ksh86 billion, aims to break into the top five banks. 

KCB CEO Paul Russo said the group sees strong growth potential in Tanzania, which has posted double-digit growth over the past five years. KCB opted to fund the expansion internally rather than through debt or shareholder contributions. Read more here.

Meanwhile, the Business Daily is also reporting that the I&M Bank has also injected Ksh1.9 billion in Tanzania and Uganda to boost operations in the respective units. The expansion will be funded through shareholder funding and a loan.

Kenya Seeks Japanese Backing for Mombasa Port Expansion and 3 Other Projects

The government is set to advance talks with Japan on major infrastructure and development projects, such as the expansion of Mombasa Port, during President William Ruto’s visit to Japan. The Head of State departed the country on Monday evening. 

As reported by Citizen Digital, the government will also be discussing with its Japanese counterpart regarding the Mombasa Port Area Road Development, the Dongo Kundu Special Economic Zone, and Nairobi’s urban transport systems.

The visit will also explore deeper collaboration in agriculture, climate change, and the rehabilitation of irrigation and forestry systems. Additionally, Kenya and Japan aim to expand educational exchanges in science, technology, and innovation

Japan is among Kenya’s largest development partners in Africa, having extended support worth over Ksh600 billion.

State Department Spends 86% of Annual Development Budget in 1 One Month

The State Department for Internal Security and National Administration has exhausted 85.7% of its development budget by the end of July, just one month into the financial year. 

Treasury data show that it spent Ksh3.4 billion out of its Ksh3.97 billion annual allocation, leaving only Ksh570 million for the remaining 11 months. 

While the Treasury did not specify what drove the early expenditure, it's believed to be linked to urgent security operations and other high-priority needs. Read more here.

NSE Hits 3-Year High as Investors Shift from Bonds

The Nairobi Securities Exchange (NSE) has gained Ksh1 trillion in market value over the past year, reaching a three-year high as investors shift away from government bonds amid declining returns.

The total market capitalization rose to Ksh2.62 trillion, with Ksh518 billion added since June alone.

As reported in the Business Daily, lower yields on Treasury bills, now ranging between 8.01% and 9.58% from highs of 16.9% a year ago, have driven investors toward equities. 

Safaricom, KCB, and Equity Bank led the surge, contributing 84.7% of the total gains.