Kenya Revenue Authority retains the fringe benefit and deemed interest tax rate at 8% for Q4 2025, reinforcing stability for employers.

NAIROBI, Oct. 26, 2025 — The Kenya Revenue Authority (KRA) has maintained both the fringe benefit tax (FBT) market interest rate and the deemed interest rate at 8 percent for the final quarter of 2025. This decision, announced on October 21, underscores KRA’s commitment to providing predictability in tax administration amid recent monetary easing.

Employers must apply an 8% market interest rate when valuing fringe benefits such as staff loans and other non-cash perks. The 8% deemed interest rate also applies to employer or shareholder loans where no interest is charged. From these amounts, a 15% withholding tax must be deducted and paid to the Commissioner within five working days, according to Bloomberg Tax.

Steady Policy Despite Rate Cuts

The 8% rate remains unchanged even after the Central Bank of Kenya (CBK) reduced the benchmark Central Bank Rate to 9.25% from 9.50% earlier this month. The move was intended to stimulate borrowing amid moderating inflation.

By keeping the FBT and deemed interest rates steady, KRA separates tax computation from short-term monetary fluctuations. This prioritizes predictability for employers and payroll systems. The Q4 rate covers October through December 2025 and serves as a reference for year-end tax planning.

Employer and Payroll Implications

Fringe benefit tax applies when employers provide non-cash benefits like low-interest loans, housing, or vehicles. Under Section 12B of the Income Tax Act, employers must compute taxable value using a prescribed market rate. Section 16(2)(ja) imposes a deemed interest charge on interest-free or below-market loans from foreign affiliates or related parties.

“The 8% benchmark provides continuity for businesses closing their financial year,” said a Nairobi-based tax consultant advising multinational firms. “Predictable reference rates help employers comply and avoid last-minute recalculations.”

Some experts warn that a fixed rate may not always reflect market conditions. If lending costs fall below 8%, the FBT may overstate taxable values. Conversely, if commercial lending rises, the rate may understate employees’ benefit costs.

The Legal Notice

KRA’s official notice states:

“For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 8%. This rate shall apply for October, November, and December 2025. For the purposes of Section 16(2)(ja) of the Income Tax Act, the prescribed rate of interest is 8%. Withholding tax at 15% on the deemed interest shall be deducted and paid to the Commissioner within five working days.”

The language mirrors the previous quarter’s directive, showing KRA’s preference for consistent FBT and deemed interest rates.

Market Reaction

Industry bodies have welcomed the move. The Institute of Certified Public Accountants of Kenya (ICPAK) said the stable tax reference improves predictability for financial reporting. “A consistent rate enables employers to make reliable projections on payroll and tax obligations,” the institute noted.

Analysts caution that future adjustments may be necessary if interest rates diverge significantly. For now, the 8% benchmark is seen as a prudent choice, offering stable compliance for employers and multinational subsidiaries through year-end.

Compliance Checklist

Tax experts advise employers to:

• Update payroll and benefits systems to reflect the 8% rate for Q4 2025.
• Reassess employee loan portfolios to ensure correct FBT calculations.
• Remit withholding tax on deemed interest within five working days.
• Document compliance with KRA’s circular for audit readiness.
• Monitor new notices for Q1 2026 adjustments.

Maintaining the same rate for two consecutive quarters reduces mid-year recalculations and supports corporate financial stability.

Fiscal Context

The decision aligns with Kenya’s broader effort to strengthen domestic revenue and maintain fiscal stability under the Medium-Term Revenue Strategy. It also complements reforms aimed at simplifying compliance and broadening the tax base without sudden shocks to the private sector.

As 2025 winds down, tax consistency is becoming a key feature of the government’s fiscal agenda. With borrowing costs stabilizing and inflation easing, Kenya’s 8% fringe benefit benchmark offers certainty to employers, investors, and auditors alike.

Kenya unveils a sovereign wealth fund on Oct. 25, 2025 to manage oil and mineral income, ensuring fiscal stability and growth.

Kenya Launches Sovereign Wealth Fund for Oil and Minerals

NAIROBI, Oct. 26 — Kenya has launched a sovereign wealth fund to manage income from its growing oil, gas, and mineral resources. The move aims to protect the economy from price shocks and, in turn, create a long-term financial buffer for citizens.

A New Model for Resource Management

The Kenya Sovereign Wealth Fund (KSWF), unveiled on Oct. 25, 2025, will pool revenues from crude oil in Turkana County, natural gas in the Lamu Basin, and minerals such as gold, titanium, and rare earth elements. In addition, the government says the fund will improve fiscal planning and stabilize spending.

The structure mirrors successful examples such as Norway’s Government Pension Fund Global and Botswana’s Pula Fund, which have helped countries convert volatile resource income into steady growth.

Finance Minister John Mbadi emphasized that the fund will promote fiscal discipline and inter-generational equity.

“This is about turning our natural resources into lasting financial assets,” Mbadi said during the Nairobi launch.

The KSWF will operate through three divisions — a Stabilization Fund to offset oil-price swings, a Savings Fund for long-term investment, and a Development Fund to finance key infrastructure. Furthermore, a professional board under Treasury supervision will ensure compliance and transparency.

Funding and Governance Structure

Kenya’s initial contribution amounts to Sh100 billion ($640 million), drawn from royalties, profit oil, and mineral income. Future inflows will include budget surpluses and returns from fund investments.

The International Monetary Fund (IMF) noted that the KSWF could strengthen Kenya’s fiscal resilience as public debt nears Sh10 trillion ($64 billion). Consequently, the IMF has encouraged clear reporting rules and risk-management frameworks.

Experts agree the timing is critical. “Establishing the fund before production peaks is a smart move,” said Faith Odinga, an economist at the Kenya Institute for Public Policy Research and Analysis (KIPPRA). “It will help Kenya avoid the overspending that often undermines resource economies.”

Other African nations, including Ghana and Nigeria, have set up similar funds. However, Kenya plans to improve governance by publishing quarterly reports and commissioning independent audits.

“Full disclosure is the only way this fund will earn public trust,” said Samuel Karanja of Transparency International Kenya. “As a result, citizens will see exactly where their money goes.”

Global Context and Local Impact

Global demand for critical minerals such as lithium and niobium continues to rise, and, therefore, Kenya has become an attractive destination for investors. The government has signed exploration deals with companies from Australia, China, and the United Arab Emirates to accelerate production.

Locally, community leaders are pushing for fair revenue sharing. Governor Jeremiah Lomorukai of Turkana said part of the fund should finance schools, hospitals, and roads in producing regions. “Communities must see visible benefits from their resources,” he said.

The KSWF aligns with Kenya’s Vision 2030 blueprint, which emphasizes industrialization and sustainable resource management. Moreover, economists believe the fund can attract foreign direct investment while stabilizing public finances.

“Kenya is taking a forward-looking step,” said Anne Mugo of Standard Investment Bank. “Turning finite resources into consistent income can, in turn, transform the economy.”

The Treasury expects to finalize KSWF regulations by March 2026, with the first inflows projected before year-end. In the meantime, it will hold public consultations to strengthen governance and community participation.

If implemented well, the sovereign wealth fund could redefine how Kenya converts its natural riches into shared prosperity. As a result, the initiative may become a model for other emerging economies seeking fiscal stability amid commodity volatility.

Ethiopia’s birr, Africa’s weakest currency in 2025, is set to strengthen as gold exports rise and IMF-backed reforms boost confidence.

ADDIS ABABA, Oct 24 (Charles Wachira) —
Ethiopia’s birr, Africa’s weakest currency in the first eight months of 2025, is expected to strengthen in the coming months. Rising gold exports and IMF-supported reforms are driving optimism for a recovery.

The projection follows the World Bank’s Africa’s Pulse report, which listed South Sudan and Ethiopia as the continent’s weakest-performing currencies this year.

Central Bank Eyes Turnaround

Eyob Tekalign, the new Governor of the National Bank of Ethiopia (NBE), told Bloomberg that the public should expect a stronger birr soon.

“For those banking on just depreciation, I would say re-look at your playbook,” Tekalign said, signaling confidence in the local currency.

The birr has lost nearly two-thirds of its value since the government floated the exchange rate in late July. Authorities, however, believe the fall is temporary.

Foreign exchange shortages and inflationary pressures had weakened the currency, but higher export earnings are starting to support the economy.

Gold Exports Outshine Coffee

Gold shipments overtook coffee for the first time in the fiscal year ending July 7, reaching US $3.5 billion, up from US $409 million a year earlier, according to Prime Minister Abiy Ahmed.

Coffee exports also rose to US $2.65 billion from US $1.4 billion. The recovery stems from the reopening of Midroc Gold Mine Plc and better incentives for small-scale miners. These measures reduced smuggling and channelled more gold through official markets.

The export surge strengthens Ethiopia’s external position and reflects the benefits of the reform agenda.

Reforms Narrow the FX Gap

The IMF-backed reforms include foreign-exchange liberalisation, inflation control, and measures to boost industrial competitiveness. These steps have started narrowing the gap between official and parallel exchange rates.

Tekalign, who previously served as state minister for finance, said exporters are changing behaviour.

“Exporters were not getting the full price of their exports. Many sold through informal routes or neighbouring countries,” he said.

Improved access to foreign currency is also reviving manufacturing. Factory capacity utilisation has risen to around 60 % as raw materials and machinery become easier to import.

Debt Talks Regain Momentum

A stronger external position has boosted Ethiopia’s credibility in debt-restructuring talks with holders of its US $1 billion eurobond. Some investors had doubted the government’s projections earlier this year.

The Africa’s Pulse report noted that the Ethiopian birr and South Sudanese pound each lost more than 10 % of their value in 2025. While recognising progress in FX reforms, the World Bank warned that limited access to dollars still fuels a wide parallel-market premium.

To restore stability, the central bank introduced new measures — publishing FX fees, capping bank charges, and raising limits on dollar sales for imports, business travel, and personal use.

Outlook: Cautious Optimism

Analysts say rising gold exports, ongoing reforms, and improved investor confidence could help stabilise the birr before year-end. However, sustained progress will depend on export diversification, fiscal discipline, and continued policy consistency.