A recent World Bank report has identified corruption as a major obstacle to Kenya's economic growth. The report states that weak governance is costing the country billions of shillings, straining public finances, and widening the fiscal deficit. Corruption alone is estimated to increase the fiscal deficit by about 2 percent of gross domestic product (GDP). This finding is significant, as it highlights the economic cost of corruption, which many Kenyans may find unsurprising.
The report also notes that corruption raises the cost of basic services, including electricity and logistics, to more than twice the levels seen in other parts of the world. Businesses rank corruption among their top concerns, with 39 percent of firms identifying it as the main constraint on their operations. Households also bear the burden of corruption. According to the World Bank, Kenya will need to address governance problems to achieve faster economic growth.
The World Bank estimates that ambitious anti-corruption reforms could have a significant impact on Kenya's economy. If implemented, such reforms could raise GDP by almost 9 percent relative to the current path by 2025, while more ambitious reforms could raise GDP by more than 20 percent. Qimiao Fan, World Bank Country Director for East Africa, noted that the economic gains from stronger governance can be substantial.
Treasury Principal Secretary Chris Kiptoo also emphasized the importance of addressing corruption. He stated that control of corruption lags behind peers, adding costs to public finances, raising the cost of doing business, and burdening firms and informal workers. The payoff from reform is large, with modelled anti-corruption reforms potentially raising GDP by 8.7 percent by 2025.
The World Bank estimates that ambitious anti-corruption reforms could create more than 7.7 million additional, higher-quality jobs across sectors by 2035, while reducing public debt as a share of GDP. The report links the potential benefits of tackling corruption to stronger economic growth, more jobs, and improved public finances, which could ultimately raise living standards.
The World Bank remains optimistic that the Treasury will act on the report's recommendations and pursue the opportunities and benefits of tackling corruption. Citizens are worried about the economic cost of corruption, seeing it as even more critical than the impact on service delivery and how it hampers the improvement of living standards.
The bank's Lead Governance Specialist noted that most of the recommended reforms do not require additional fiscal spending. The World Bank's report offers a stark estimate of corruption's economic cost and highlights the need for governance reforms to achieve faster economic growth and improved living standards in Kenya.
Key points
- Corruption increases Kenya's fiscal deficit by about 2 percent of GDP
- Ambitious anti-corruption reforms could raise Kenya's GDP by more than 20 percent by 2025
- Anti-corruption reforms could create over 7.7 million additional jobs in Kenya by 2035
