Corruption is costing Kenya billions of shillings every year, worsening the government’s debt burden and undermining economic growth at a time when households are struggling with expensive food, transport, electricity and other necessities.
The World Bank estimates that corruption and collusion cost the country approximately two per cent of its Gross Domestic Product (GDP) annually, warning that weak governance is preventing Kenyans from fully benefiting from economic growth.
“Governance challenges are increasingly limiting Kenya’s prospects for faster and more broadly shared growth, with corruption as the key binding constraint,” the lender said in its latest Kenya Economic Update released on Wednesday.
The warning comes as the cost of living continues to rise, with official figures showing annual inflation climbing to 7.3 per cent in October, up from 6.8 per cent in September.
Food and non-alcoholic beverages recorded a 10.2 per cent increase over the year, while transport costs rose by 17.1 per cent. Housing, water, electricity, gas and other fuels increased by 3.7 per cent.
The three categories account for more than 57 per cent of the expenditure basket used to calculate inflation, meaning the price increases are concentrated in items that households cannot easily avoid.
For ordinary Kenyans, this means spending more on food shopping, commuting to work, paying rent and keeping their homes running, leaving less money for savings, education and healthcare.
The World Bank says corruption is worsening the economic environment by increasing the cost of government operations, weakening public finances and making it more expensive for businesses to operate.
“Corruption and collusion cost the country an estimated 2 per cent of GDP a year,” the lender said, warning that the losses translate into higher fiscal deficits and additional borrowing requirements.
“This translates into substantial additional borrowing needs accumulating over time,” the report added.
The consequences are particularly significant for a country already struggling with substantial debt repayments and limited room to increase spending on development and public services.
The lender also warns that corruption increases the cost of borrowing, as investors factor governance risks into the interest rates they charge the government.
“Corruption risks contribute to a higher cost of borrowing,” the report said, describing the additional expense as a governance premium on sovereign borrowing.
Bribes in everyday business
The World Bank’s findings also expose how corruption affects businesses seeking routine government services.
Nearly 36 per cent of Kenyan firms reported experiencing at least one request for a bribe in the preceding year.
About 41 per cent of businesses reported expectations of paying bribes to secure electricity connections, while 29 per cent faced similar expectations when seeking construction permits. Another 22 per cent reported pressure to pay bribes when dealing with tax officials.
The demands create additional costs for businesses, which may ultimately be passed on to consumers through higher prices for goods and services.
Medium-sized enterprises face particular pressure, with 48.2 per cent reporting expectations of giving gifts to public officials to get things done.
The bank says these practices discourage investment, reduce business competitiveness and limit the ability of companies to expand and create jobs.
The problem is particularly damaging in an economy where most workers are already struggling with insecure employment and limited incomes.
The World Bank’s findings indicate that approximately 84 per cent of jobs remain informal, leaving many workers without the security, benefits and protections associated with formal employment.
Government under pressure
The lender says tackling corruption could improve public finances, reduce borrowing requirements and create room for investment in services and infrastructure.
Treasury Principal Secretary Chris Kiptoo said the government was implementing reforms to improve accountability, including digitising public procurement and strengthening conflict-of-interest rules.
“Good governance is not separate to our development agenda — it is the foundation,” Kiptoo said.
The government has also pointed to efforts to improve payment timelines for contractors and strengthen public financial management.
However, the World Bank says reforms must translate into tangible improvements in how public resources are managed and how government services are delivered.
The lender raised its 2026 economic growth forecast for Kenya to 4.6 per cent from 4.3 per cent following stronger-than-expected performance in the first half of the year.
But it warned that governance weaknesses, fiscal slippages, rising debt and uncertainty ahead of the August 2027 General Election could undermine investment and economic stability.
