Kenya’s economy is expected to grow more slowly in 2025, with a growth rate of 4.5% compared to 4.7% in 2024, according to a report from the World Bank released on May 27, 2025.
The report highlights some important problems. It says the slowdown is due to low tax income, high public debt, and less money being lent to businesses.
The World Bank points out that Kenya’s public debt was 65.5% of the country’s total economic activity (GDP) by the end of 2024, which is making it difficult for the economy to be strong.
Almost a third of Kenya’s tax money is being used just for paying interest on debts, which is a serious issue for the country’s financial health.
The report also notes that Kenya’s tax collection, compared to its economic size is lower than it should be. This is made worse by a small number of people paying taxes and relying too much on taxes for spending.
The report stated, “Kenya’s revenue performance continues to fall short, limiting the government’s capacity to fund development and social protection.”
During the launch of the report, Treasury Cabinet Secretary John Mbadi agreed with the World Bank’s findings, saying, “We know we need to make strong changes to improve how we collect taxes. We want to manage our finances well without hurting important services.”
According to the World Bank, high costs to pay off debts are taking away money that could be used for important projects like building roads and supporting education.
The report also mentions that lending to private businesses has shrunk, with negative growth reported in December 2024. Sectors like manufacturing, mining, and finance are particularly affected.
Naomi Mathenge, a senior economist at the World Bank, said high interest rates are partly responsible for this. “The cost of borrowing is still too high, making it hard for businesses to get loans. This affects jobs and growth in important areas,” she explained.
Although inflation has gone down and the exchange rate has stabilized, the World Bank stressed that Kenya must make urgent changes in its finances and systems to keep the economy stable.
Qimiao Fan, the World Bank Country Director for Kenya, encouraged leaders to solve the reasons behind low tax income and wasteful spending: “Good financial management and better tax collection are essential to regain investor trust and to create more room in the budget for development.”
The World Bank believes that Kenya’s economy could improve to about 5.0% growth in 2026–27, but only if the right reforms are made effectively.
The report suggests creating a medium-term plan for tax income, improving how public money is managed, and increasing access to low-interest loans.
As Kenya faces tough choices between paying debts and meeting development needs, the report urges leaders to show they are committed to managing finances responsibly.
The report warns that failing to act could deepen financial troubles and slow progress in reducing poverty and improving the economy.
