Kenya could grow GDP by 22 per cent by 2035 if it tackles corruption, World Bank says

Kenya could grow GDP by 22 per cent by 2035 if it tackles corruption, World Bank says

Businesses are bearing the cost, with 39 per cent of firms in Kenya considering corruption a major or severe constraint in 2025, up from 25 per cent in 2013.

Corruption is undermining Kenya's economic growth, discouraging private investment and limiting job creation, with governance failures estimated to widen the country's annual fiscal deficit by two percentage points of GDP, the World Bank has said.

In its latest Kenya Economic Update launched on Wednesday, the lender said governance weaknesses have become a major obstacle to faster and more inclusive economic growth. This is despite the country's relatively resilient economic performance and progress in maintaining macroeconomic stability.

The report identifies corruption as the biggest governance constraint, arguing that preferential treatment of politically connected businesses, non-competitive public procurement and opaque government contracts are weakening competition and slowing economic transformation.

The economic costs extend beyond government finances to businesses and ordinary households, with corruption weakening revenue collection, reducing the efficiency of public spending and increasing the cost of government borrowing.

The lender estimates that corruption and governance weaknesses contribute an additional two percentage points of GDP to Kenya's annual fiscal deficit, partly through tax evasion, preferential tax treatment and inefficiencies in infrastructure procurement.

Businesses are also bearing the cost, with 39 per cent of firms in Kenya considering corruption a major or severe constraint in 2025, up from 25 per cent in 2013.

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A further 36 per cent of businesses reported experiencing at least one bribery request in the preceding year, with medium-sized enterprises particularly exposed.

The report says 48 per cent of these firms are expected to offer gifts to get things done, compared with 36 per cent of small firms and 31 per cent of larger enterprises.

Such practices are undermining productivity, with firms exposed to bribery being more than 30 per cent less likely to introduce innovations and recording lower growth in labour productivity and sales.

The impact is equally severe among informal workers, who account for 83.8 per cent of Kenya's workforce and can lose up to 20 per cent of their daily earnings to bribes demanded by traffic police and municipal inspectors.

The World Bank, however, says tackling corruption could unlock substantial economic gains, with moderate anti-corruption reforms potentially increasing GDP by 8.7 per cent by 2035 compared with a scenario in which current governance weaknesses persist.

It notes that stronger reforms could raise GDP by 22.3 per cent, reduce the debt-to-GDP ratio by up to 18 per cent relative to the status quo and generate more and better jobs for up to 7.7 million people.

“Better control of corruption would also translate into sizable impacts of more and better jobs for up to 7.7 million people, and up to 27 per cent greater household consumption,” the lender said.

The report calls for sustained political leadership, stronger accountability in public procurement, greater transparency in government contracts and digitisation of administrative processes to reduce opportunities for bribery.