Kenya’s economic growth is slowing despite two decades of steady expansion that lifted millions out of poverty, with the World Bank warning that the country must implement far-reaching reforms to sustain development and create quality jobs.
The warning is contained in a new World Bank report reviewing Kenya’s economic performance over the past 20 years. The report states that while the country has demonstrated resilience, mounting public debt, slowing growth, weak exports and climate-related shocks threaten to reverse earlier gains unless decisive action is taken.
According to the report, Kenya’s economy recorded an average annual growth rate of 4.5 per cent between 2001 and 2025, driven mainly by the services sector and other non-tradable industries. During the same period, poverty declined from 46.7 per cent in 2005 to 33.6 per cent in 2019, while access to employment, education, healthcare and clean water improved significantly.
However, the COVID-19 pandemic disrupted this progress, pushing the poverty rate to 42.9 per cent in 2020. Although conditions have since improved, poverty remains above pre-pandemic levels.
The World Bank noted that slowing economic growth, declining wages and rising debt have exposed underlying structural weaknesses. It said Kenya’s public debt had risen to 71.3 per cent of Gross Domestic Product (GDP) by the end of 2025, increasing the country’s risk of debt distress.
The report also pointed to the withdrawal of the Finance Bill 2024 following nationwide protests as evidence of the growing challenges associated with relying on higher taxation to finance public spending. It argued that Kenya’s growth model, built largely on debt-financed public investments, has reached its limits as rising debt-servicing costs continue to squeeze public finances and restrict private sector access to affordable credit.
To restore sustainable growth, the World Bank identified four priority areas requiring urgent reforms. These include strengthening public finances through fiscal consolidation, improving export competitiveness, boosting productivity and job creation, and enhancing climate resilience.
The lender observed that while nearly 800,000 young people join Kenya’s labour market annually, fewer than 100,000 secure formal employment, leaving many trapped in low-paying informal jobs and subsistence agriculture.
It recommended improving the business environment, closing skills gaps, attracting investment and leveraging trade agreements to drive export-led growth. The report also warned that recurring droughts and floods continue to threaten agriculture, infrastructure and livelihoods, making climate adaptation essential for Kenya’s long-term economic stability.
