Corruption and collusion are estimated to widen Kenya’s annual fiscal deficit by about two percentage points of gross domestic product (GDP), the World Bank said in an economic report presented on 4 November 2026. Lost tax revenue and inflated public procurement costs increase the government’s borrowing needs at a time when public debt is already high.
In the 34th edition of its Kenya Economic Update, the lender links the fiscal burden to preferential treatment for politically connected firms, tax evasion and weak competition in public contracts. It also finds that governance problems raise the risk premium demanded by creditors, pushing up sovereign borrowing costs.
Borrowing rises as fiscal targets slip
Kenya’s actual deficit reached 6.8% of GDP in the 2025–2026 fiscal year, compared with an original budget target of 4.7% and an outturn of 6% a year earlier. Gross public debt stood at 69.9% of GDP at the end of June 2026, while interest payments absorbed 5.8% of GDP, according to the same report. Most of the deficit was financed domestically, increasing banks’ exposure to government securities.
The World Bank also modelled how stronger control of corruption might affect external borrowing costs. A one-standard-deviation improvement in the corruption perceptions index could, under its scenario, lower those costs by 50 to 100 basis points, saving $50 million to $100 million a year on around $10 billion of outstanding external bonds and commercial borrowing in early 2026.
Businesses face a growing obstacle
Governance weaknesses also affect private investment. In enterprise surveys cited by the World Bank, 39% of Kenyan firms described corruption as a major or severe obstacle in 2025, up from 25% in 2013. Some 36% said they had faced at least one request for a bribe in the preceding year, a problem the lender associates with weaker innovation and investment.
Kenya’s Treasury Principal Secretary Chris Kiptoo defended government reforms on Wednesday, citing digital procurement, new conflict-of-interest rules and more predictable payment schedules for contractors, according to Reuters. The World Bank raised its 2026 growth forecast to 4.6% from 4.3%, while the Treasury expects expansion of at least 5%.