NAIROBI, Kenya — Kenya is losing up to Sh194 billion each year due to corruption, illicit financial flows, and tax loopholes, according to a new report by the African Development Bank (AfDB) that paints a grim picture of the country’s public financial management.
The African Economic Outlook Kenya Country Focus Report, released in Nairobi on Wednesday, details how mismanagement, excessive tax incentives, and weak legal enforcement are depleting national revenue and hindering Kenya’s ability to invest in critical sectors like healthcare, education, and infrastructure.
The AfDB estimates that public spending inefficiencies alone cost Kenya at least Sh650 billion annually, equivalent to 5% of the country’s GDP.
Tax exemptions and incentives drain an additional Sh105 billion from the national coffers every year.
“These financial leakages are pushing Kenya deeper into debt, with interest payments now outpacing allocations for essential services,” the report warns.
$1.5 Billion Lost to Graft and Illicit Flows
The AfDB report estimates that corruption and illicit financial flows cost Kenya up to $1.5 billion (Sh193.6 billion) each year — money that, it notes, could transform the country’s development landscape.
The bank cites state capture — where powerful elites influence legislation and enforcement to serve their interests — as a major barrier to reform.
This entrenched problem weakens the rule of law, discourages investment, and undermines public trust.
“Investors fear biased rulings, delays, and lack of transparency, which increases operational risks and deters investment,” the report states. “Upholding the rule of law through strong enforcement and an independent judiciary is essential for sustained growth.”
The AfDB’s estimate of Sh193.6 billion in corruption-related losses is significantly lower than the Ethics and Anti-Corruption Commission (EACC) figure of Sh608 billion, or 7.8% of GDP, lost annually to corruption.
Kenya Ranks Low on Global Corruption Index
Kenya continues to struggle on the global stage when it comes to governance.
The 2024 Transparency International Corruption Perceptions Index ranks the country 121st out of 180 nations, with a score of 32 out of 100 — below the regional average of 33 and the global average of 43.
The country’s performance has seen minimal improvement, with its score rising by just one point since 2020.
Since 1996, Kenya’s average ranking has been 125, with the worst performance recorded in 2010 at position 154.
Growth Projections Positive — But Uneven
Despite these governance challenges, the AfDB remains cautiously optimistic about Kenya’s economic prospects.
It forecasts a 5% GDP growth in 2025, driven largely by agriculture and the services sector. Growth is, however, projected to dip slightly to 4.8% in 2026.
Still, the report warns that Kenya’s growth has not been inclusive, citing rising poverty, inequality, and unemployment.
“High unemployment and growing inequality indicate that Kenya’s economic growth has not been fully inclusive,” the bank notes.
The AfDB’s projections are slightly more optimistic than those of the World Bank and IMF, which forecast growth to slow to 4.8% in the coming year.
Across the continent, the AfDB expects GDP to rise to 3.9% in 2025 and 4% in 2026, though it warns global trade tensions could disrupt exports and supply chains.
