The Soaring Cost of Living-

Kenyans are grappling with a severe cost of living crisis, impacting their ability to afford basic necessities.

• Inflation: While the annual inflation rate remained stable at 3.8% in June 2025, it had risen to a five-month high of 3.5% in February 2025, driven primarily by higher prices of food, electricity, water, and transport. This followed four consecutive months of increasing inflation since November 2024.

• Food Prices: Food and non-alcoholic beverages are the most affected categories, constituting a significant portion of household budgets. The price of maize flour, a staple, increased by over 20% in the year leading up to early 2025, with a 2kg packet retailing at an average of KSh 170. Similarly, cooking oil, sugar, and vegetables have become unaffordable for many, forcing families to cut down on meals or shift to cheaper alternatives.

• Fuel Costs: Fuel prices have remained elevated despite global crude oil fluctuations, directly impacting transport costs and, consequently, the prices of all goods and services. Public service vehicles have increased fares, further burdening commuters.

• Utility Bills: Electricity and water costs have also seen significant hikes, adding to the financial strain on households.

• Stagnant Wages: Compounding these rising expenses, wages have largely remained stagnant. A report by the Federation of Kenyan Employers (FKE) indicates that real wage growth has lagged behind inflation, effectively reducing the ability of workers to maintain their standard of living. This has forced many Kenyans to rely on debt, with mobile loans and salary advances becoming a lifeline.

Impact of Tax Increases-

The government's taxation policies have significantly exacerbated the cost of living crisis, sparking widespread public anger and fueling the protests.

• Finance Act 2023: This Act introduced several unpopular measures, including:

  • A 1.5% housing levy deducted from salaries, intended to fund affordable housing projects.

  • An increase in Value Added Tax (VAT) on petroleum products from 8% to 16%, directly contributing to higher fuel prices and cascading costs.

  • These measures directly increased production costs for businesses, which were then passed on to consumers through higher prices.

• Finance Bill 2025: While the government claimed the Finance Bill 2025 would not introduce new tax increases, analysis by organizations like IEA Kenya has shown that some proposed amendments would effectively raise the tax burden, particularly on salaried workers.

  • Personal Relief Reversal: A subtle but significant amendment to the Income Tax Act proposes to change how personal relief (a monthly tax benefit of KSh 2,400) is applied. Instead of being offset against tax payable after calculation, it would now be a deduction before computing taxable income. Depending on interpretation, this could reduce net income for many employees, especially lower and middle-income earners who heavily rely on this relief. Critics have termed this "taxation by stealth."

  • Expanded Tax Base and New Levies: The Bill also proposes to expand the definition of "royalty" to include software distribution, making it subject to withholding tax and likely increasing software costs. It also broadens the scope of Significant Economic Presence Tax (SEPT) and potentially introduces new excise duties on digital services.

  • Impact on Businesses: The Bill proposes to cap the carryforward of tax losses to five years, a significant shift from the previous indefinite period. This could negatively affect capital-intensive sectors and discourage long-term investment.

Public Anger and Protests-

The combined effect of a persistent cost of living crisis and relentless tax increases has pushed many Kenyans, particularly the youth (often referred to as "Gen Z"), to their breaking point.

• June 2024 Protests: The initial mass protests against the Finance Bill 2024 were a direct response to proposed tax hikes. The sheer scale and intensity of these demonstrations, which saw the storming of Parliament, forced the government to withdraw the contentious bill.

• June 2025 Protests: The renewed protests in June 2025, commemorating the deadly events of the previous year, indicate that the underlying economic grievances remain unaddressed. Despite the withdrawal of the most controversial parts of the 2024 bill, the cumulative burden of existing taxes, coupled with the subtle increases in the Finance Bill 2025 and the overall high cost of living, continue to fuel widespread discontent.

• Disillusionment: The public's anger is intensified by the perception that the government is not listening to their concerns. Many feel that the economic policies disproportionately benefit a small elite, while the general population struggles to make ends meet. This fuels a sense of injustice and profound disillusionment, making the cost of living and taxes a core driver of continued unrest.

Economists and civil society groups continue to warn that unless the government takes urgent action to alleviate the burden of high taxes and control the cost of living, the purchasing power of Kenyans will continue to decline, pushing more households into poverty and further escalating social unrest.