Kenya's economy is doing better than last year, but a new World Bank report says corruption is the biggest thing stopping it from growing faster and giving more Kenyans decent jobs.
The report, Kenya Economic Update Edition 34, was released this month. It shows the economy grew by 5.2 percent in the first half of 2026, up from 4.9 percent in the same period last year. Industry and services did the heavy lifting, with construction doing especially well. Farming slowed to 4.2 percent because the short rains were below average. For the whole of 2025, growth was 4.6 percent.
On jobs, the news is mixed. Employment grew by 4 percent in 2025, and workers in formal jobs saw their real pay rise by about 2 percent. But about 84 out of every 100 working Kenyans are still in informal work, where earnings are low and unpredictable. The Bank says this is why poverty is falling so slowly. It expects the poverty rate to ease only to 43 percent this year and 41.4 percent by 2028.
Things at home are also getting tougher. Inflation shot up to 7.3 percent in October from 4.6 percent a year ago, pushed by fuel and food prices, which both rose by more than 10 percent. The Central Bank has kept its rate at 8.75 percent since February. The Bank warns that the conflict in the Middle East could push fuel and shipping costs even higher, and that an extra 1 to 2.4 million Kenyans could slip below the poverty line this year, mostly in towns and cities.
The government's own books are another worry. The deficit for the 2025/26 financial year came in at 6.8 percent of GDP, far above the 4.7 percent that was planned. The report blames repeated supplementary budgets that raised spending above what Parliament first approved. Public debt is now 69.9 percent of GDP, and more than half of it is owed locally. Interest payments alone eat up 5.8 percent of GDP. Because banks lend so much to government, the Bank says there is a risk that private businesses will find it harder to get loans. It still rates Kenya at high risk of debt distress.
There is some comfort on the external side. Foreign reserves are at US$14.7 billion, enough for about 5.9 months of imports, and the shilling has stayed fairly steady. But the import bill is growing faster than exports, and diaspora remittances dipped slightly to US$5.1 billion. As a result, the current account deficit has widened sharply.
The main message of the report, though, is about governance. It says Kenya does reasonably well compared to other African countries on many governance measures, but on controlling corruption it does worse than every group of countries it is compared with. According to the Bank, state resources such as licences, tenders, power deals and appointments in state corporations are often used to keep political alliances together, and the economy pays the price.
The report lists four ways this hurts ordinary people and businesses. First, corruption weakens tax collection and wastes public money, and the Bank estimates it widens the yearly deficit by about 2 percentage points of GDP. Second, it makes basic services expensive. Power for businesses costs more than double what it does in Viet Nam and about 50 percent more than in Uganda. Mombasa port is ranked 375 out of 403 ports worldwide, partly because of multiple inspections, and truckers carrying farm produce and building materials are stopped at many county cess points.
Third, it hurts business. In 2025, 39 percent of firms said corruption was a major problem, up from 25 percent in 2013, and 36 percent said they had been asked for a bribe in the past year. Medium-sized firms are hit hardest, with almost half saying they are expected to give "gifts" to get things done. Firms that face bribery are also less likely to bring in new ideas and see slower growth in sales and productivity.
Fourth, it eats into the pockets of small traders and informal workers. The Bank says they can lose up to 20 percent of their daily earnings to bribes demanded by traffic police and city inspectors.
The report does offer hope. If Kenya carries out moderate anti-corruption reforms, GDP could be 8.7 percent bigger by 2035 than it would be otherwise, and 22.3 percent bigger with stronger action. Public debt as a share of GDP could drop by up to 18 percent, and up to 7.7 million people could get more and better jobs. The Bank says these gains are within reach, since countries like Tanzania, Côte d'Ivoire and India have already reached similar levels of improvement.
The World Bank wants government to stick to its fiscal rules, set realistic budgets and cut back on supplementary budgets. It also wants tax exemptions reviewed, power and transport costs brought down, and procurement and revenue systems put online. It also wants the 2025 Conflict of Interest Act properly enforced, with clearer records on who really owns companies.
In short, the report says Kenya's economy is strong enough to keep going, but whether it can grow faster and give Kenyans better jobs will depend on how seriously leaders deal with corruption.
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