Photo Credit: Adobe Stock
Kenya’s fork in the road
“Kenya has been running on borrowed time—literally.”
Over the last five fiscal years (2020/21-2024/25) roughly one-quarter of all government spending has come from new debt, locking the country in a classic fiscal trap: spending more than it earns while borrowing to plug the gap. The withdrawal of the controversial Finance Bill 2024 leaves an even bigger revenue hole, raising fears that projected deficit cuts—from 5.7 % to 3.3 % of GDP—could prove illusory.
Yet peers facing similar pressures are proving that a turnaround is possible. What they have in common is a willingness to pair tough reforms with digital-age tools—especially blockchain and crypto rails—to widen the tax net, lower borrowing costs and rebuild public trust.
Global playbook: digital money meets fiscal policy
| Country | Digital tool | Fiscal payoff |
|---|---|---|
| Brazil | Drex retail/wholesale CBDC on a permissioned blockchain | Expected to cut payment-system costs, widen financial inclusion and streamline large-ticket government transactions once it launches in early 2025 Economist Intelligence Unit |
| Nigeria | eNaira CBDC + pending 0.5–1 % crypto capital-gains tax & 10 % VAT on exchanges | Government estimates up to ₦200 bn (≈ US $250 m) extra annual revenue; eNaira pilot already logged 700 k transactions worth ₦8 bn and is being integrated into the Treasury Single Account for cash-transfer programs Central Bank of NigeriaCointelegraph |
| United States (Quincy, MA) | $10 m tokenised municipal bond issued on JPMorgan’s Onyx blockchain | Lower issuance friction and live, on-chain transparency have left the bond trading at 112 % of par, showing how blockchain can deepen liquidity and reduce funding costs CFO |
Why blockchain matters for Kenya
-
Seal the leaks in revenue collection
-
Problem: Informality and manual processes keep Kenya’s tax-to-GDP stuck near 15 %.
-
Blockchain fix: A CBDC or tokenised tax-collection platform can log every shilling in real time, narrowing room for under-declaration and graft. Nigeria’s plan to apply analytics to eNaira flows and crypto exchanges offers a live case study. Cointelegraph
-
-
Cheaper, fairer borrowing
-
Kenya already pioneered retail bonds with M-Akiba; migrating the next tranche to a tokenised ledger would slash registrar fees and let even small savers buy, as Quincy just proved. Secondary-market liquidity could rise, trimming yields by basis points that add up on KSh trillions of debt. CFO
-
-
Stretch every budget shilling with transparent smart contracts
-
Conditional disbursement of county-level transfers or donor funds can be coded so money is released only when predefined milestones are met, cutting opportunities for diversion.
-
-
Unlock the diaspora dividend
-
Kenyans abroad remitted about US $4 bn in 2023, but the average cost of sending US $200 into Africa is 7.9 %. Digital channels already cut that to 5 % globally; stablecoin-powered corridors could push the cost near the UN SDG target of 3 %, leaving more spendable income—and taxable VAT—inside Kenya. World Bank
-
-
Leverage existing digital rails
-
With M-Pesa moving 59 % of GDP over mobile wallets, the population is primed for a blockchain layer. The draft Virtual Asset Service Providers Bill—now out for public comment—creates the legal on-ramp Kenya needs to supervise exchanges, stablecoins and tokenised securities. Blockchain
-
A five-step roadmap for Nairobi
-
Pass the VASP Bill and sandbox pilots
Fast-track licensing so reputable exchanges and fintechs can operate under clear rules, mirroring Brazil’s phased Drex rollout. -
Green-light a tokenised t-bill pilot
Start small—say KSh 5 bn—and use on-chain settlement to test demand, custody and secondary trading. -
CBDC feasibility sprint
Build on the Central Bank’s 2022 discussion paper by launching a 12-month proof-of-concept focused on government-to-person payments (cash transfers, pensions) and wholesale inter-bank settlement. -
Digitise the Kenya Revenue Authority (KRA) back-end
Integrate blockchain analytics to cross-match VAT invoices and customs data, following Nigeria’s template. -
Diaspora remittance corridor
Partner with licensed global stablecoin issuers to pilot low-cost USD-KES transfers, with automatic conversion into e-money wallets or bank accounts.
The political economy question
Technology is not a silver bullet; Brazil still needs fiscal discipline, and Nigeria is discovering that taxes without enforcement disappoint. But digital rails amplify good policy—and expose bad ones faster and more transparently than ever before. For Kenya, that is precisely the point.
Kenya faces a choice: double down on the old borrowing model, or become the first African nation to marry mobile-money ubiquity with blockchain-level transparency.
The latter could turn today’s fiscal crossroads into tomorrow’s fast lane.
