Kenya’s economic recovery is showing signs of fragility, the World Bank warned as rising debt and persistent fiscal pressures threaten to undermine recent gains.
The country has seen inflation stabilise, its exchange rate hold steady, and foreign exchange reserves reach near-record highs. A World Bank report painted a cautiously optimistic near-term outlook, forecasting average annual growth of 4.9 per cent between 2025 and 2027, up from earlier projections.
The revision reflects “improving monetary conditions, stronger private sector lending, and a revival in key industries such as construction,” the Bank said. “Private sector credit grew five per cent year‑on‑year by September 2025, supported by lower lending rates and accommodative policies.”
Yet the report highlighted serious risks. Kenya’s fiscal deficit for 2024/25 widened to 5.9 per cent of GDP, exceeding the government’s target of 4.3 per cent, driven largely by weak revenue collection and rigid spending patterns.
“Fiscal pressures are intensifying driven mostly by revenue shortfalls and increasingly rigid expenditure structures,” the Bank said, warning that risks of further fiscal slippage remain high.
Public debt has surged to 68.8 per cent of GDP, pushing the country deeper into a high-risk debt distress category.
“Many key macroeconomic indicators continue to show strength; however, the fiscal outlook remains subject to downside risks that could threaten sustained and inclusive economic growth,” said Jorge Tudela Pye, the Bank’s Country Economist for Kenya.
Qimiao Fan, the Bank’s Division Director for Kenya, Rwanda, Somalia, and Uganda, said Kenya’s long-term growth depends on tackling structural challenges.
“Economic growth momentum could be further sustained by addressing key barriers to competition, more and better‑paying jobs, and lower prices to consumers,” he said.
The Bank underscored that Kenya stands at a crossroads: favourable monetary and external conditions support growth, but deteriorating fiscal health could stall progress if urgent reforms are not implemented.
