The World Bank is warning that Kenya risks being trapped in a middle-income status with corruption being cited as the biggest obstacle to growth.
According to the 34th edition of the Kenya Economic Update, nearly 36% of firms in Kenya report having experienced at least one bribery request in the past year, a proportion that is higher than that its peers in Sub-Saharan Africa and upper middle-income economies.
The report shows that at least 22% of firm in Kenya are expected to pay bribes to meet tax officials, while 41% and 29% are expected to pay bribes to get electrical connection and construction permits respectively.
“The problem is that businesses are burdened in so many specific ways that overall the competitiveness that the economy has is reduced by these governance constraints,” said Verena Fritz, Lead Governance Specialist, World Bank Group.
According to World Bank Division Director Dr Qimiao Fan, despite Kenya’s economy being resilient, the country still faces fiscal pressures and governance constraints are limiting growth and job creation.
Fiscal deficit now accounts for 6.8% of GDP as at the end of 2025/26 financial year while public debt has hit Ksh 13.3 billion equivalent to 72.3% of GDP as of August 2026.
“While employment is also growing, the quality of jobs remains a challenge. Almost 84% of jobs remain formal and obviously informal jobs have lower pay and productivity and limited protection of the workers. The challenge therefore is not only to manage the fiscal pressure but to create more and better jobs,” said Dr Fan.
Speaking during the launch of the report, Treasury Principal Secretary Dr Chris Kiptoo said to support creation of sustainable jobs and reduce fiscal pressures, the government is keen to rationalize spending to reduce overall fiscal deficit.
“Debt levels remain elevated and that is why we are pursuing fiscal consolidation which must stay on course and we must stick to bringing fiscal deficit to 4.6% of GDP by 2030/31. The bigger challenge of course is jobs. Employment grew by 4% in 2025 and the report shows that 83.8% of the jobs remain informal,” added Kiptoo.
The World Bank says the 5.2% growth registered in the first half of this year was supported by strong performance in industry and services sectors which expanded by 4.9% and 5.2% respectively and which helped offset slowdown in agriculture from 4.7% to 4.2%.
