The country will now operate under the Finance Bill, 2023 after President William Ruto announced the withdrawal of the tax measures that triggered deadly protests.
The Finance Bill, 2024 will now be referred back to the National Assembly with a memorandum detailing reasons for declining to assent to it into law.
The Majority Leader will then move a motion seeking the House's concurrence with the president's recommendations as provided under the Standing Orders.
A resolution will be passed that will see the Bill withdrawn in its entirety.
The Kenya Kwanza government was seeking to raise nearly Sh200 billion in extra revenue to finance its projects through the Finance Bill, 2024.
The government had presented to Parliament a Sh3.99 trillion budget for the financial year 2024–25.
The law allows the government to continue collecting revenue based on the Finance Act, 2023 that is already in place.
Renowned economist and former Mandera Senator Billow Kerrow says if the Bill is dropped there will be no government shutdown.
He argued that the Finance Bill, 2024 is not for raising the 2024/25 government's estimated revenue of Sh 3.4 trillion, but it contains tax measures intended to raise an additional tax of Sh346 billion only.
“If the Bill is not passed, KRA will still collect the targeted Sh3.4 trillion less the 346 billion. It's misleading to tell Kenyans that there will be no money to run the government, build roads, etc. The government will not shut down," he said.
The government will continue using the Appropriation Act, of 2023 to continue accessing money to run its expenditures in light of the withdrawal of the Finance Bill, 2024.
The MPs had on Tuesday passed the Appropriations Bill, 2024 alongside the Finance Bill, 2024 and was awaiting presidential assent.
Last year, the High Court ruled that revenue-raising measures must first be approved before the Appropriation Bill is introduced to the House.
The Appropriation Act guides government spending in the absence of the Finance Act.
In such a scenario, the government can access the presently approved spending estimates.
On Wednesday, President Ruto said he had withdrawn the contentious Finance Bill, 2024 after listening to the people.
“Having reflected on the conversation on the contents of the Finance Bill and having listened keenly to the people who have spoken loudly that they don’t want anything to do with this finance Bill, 2024, I concede and I will not sign the Bill and it will be withdrawn,’’ Ruto
The government will have to slash budgets for crucial departments and engineer radical policy shifts to align the budget with the revenue projections.
The National Treasury had last week written to the National Assembly warning of massive budget cuts if the Finance Bill, 2024 was not enacted.
The National Assembly had proposed to cut Sh178 billion from the Financial Year 2024/2025 budget as rationalization in anticipation of the failure of parliament to pass the Finance Bill 2024.
The Judiciary will now suffer rationalization of the recurrent budget by Sh2 billion, while the executive office of the President’s Operations budget will be slashed by Sh451 million.
The State House Operations and Maintenance budget will also be cut by Sh500 million while Parliament’s recurrent budget will also be cut by Sh2.7 billion.
Parliament’s development budget will be slashed by Sh450 million.
The Junior Secondary Schools (JSS) whose confirmation and hiring of JSS teachers will be cut by Sh18.9 billion, cash transfers Sh5.5 billion, and the Constituency Development fund (NG-CDF) to lose Sh15 billion.