The World Bank has urged Kenya to raise consumption taxes to clear supplier arrears. These include excise duty and VAT. Pending bills rose to Sh526 billion in June from Sh421.6 billion in March. The increase has pushed many businesses to the edge. The lender did not say whether to raise current rates or expand the tax base.

Kenya charges 16% VAT on most goods. Basic items like maize flour and bread are exempt. Excise duty covers fuel, alcohol, airtime, cigarettes, and betting. Revenue from these taxes rose slightly this year. However, it still fell short of targets.

The government avoided new tax hikes after deadly protests last year. The unrest forced President William Ruto to drop Sh346 billion in planned increases. Instead, the Treasury is expanding the tax net. It is also cracking down on tax evasion. Meanwhile, wages are not keeping up with inflation.

This has eroded household incomes.

The World Bank’s call comes as pending bills stay high. This is despite securitised bond payments. National bills rose by Sh104 billion in the second quarter. Counties owe Sh172.5 billion.

To ease pressure, the Treasury plans to clear arrears through the road levy and bond issues. The Bank also wants broader tax reforms to boost fiscal stability.