Corruption is costing Kenya an estimated Sh370 billion annually through lost tax revenue, inefficient public spending and increased government borrowing costs, according to a new World Bank report. The losses account for approximately two per cent of the country’s Gross Domestic Product (GDP), putting additional pressure on public finances and limiting resources available for development projects and essential services.
The report, contained in the latest Kenya Economic Update, identifies weak governance and corruption as major obstacles to economic growth, investment and job creation. The World Bank warned that corruption affects different levels of the economy, from bribes demanded from ordinary citizens to irregularities in government procurement and expensive infrastructure contracts.
The impact is also being felt by businesses, with 39 per cent of Kenyan firms identifying corruption as a major or serious challenge to their operations in 2025, compared to 25 per cent in 2013. Another 36 per cent reported being asked to pay a bribe at least once during the previous year. The report further linked governance weaknesses to the high cost of electricity, noting that only 24 per cent of 42 power purchase agreements examined in a 2021 study were known to have been awarded through competitive processes.
It also highlighted the cost of infrastructure projects, noting that Kenya’s Nairobi-Mombasa railway cost about a third more per kilometre than a comparable railway line in Tanzania. The World Bank estimates that recovering just 10 per cent of losses associated with procurement irregularities could save the country approximately Sh120 billion annually.
However, the lender said stronger governance and anti-corruption measures could improve the country’s economic performance and create more employment opportunities. Its modelling shows that moderate reforms could increase Kenya’s GDP by 8.7 per cent by 2035 compared to a situation where existing governance challenges continue. More ambitious reforms could raise economic output by 22.3 per cent and support the creation of up to 7.7 million additional and better-quality jobs.
The reforms could also improve household incomes, reduce public borrowing requirements and create a better environment for businesses to operate. The government has pointed to measures such as digitising public procurement, introducing conflict-of-interest legislation and improving payment systems for contractors as part of its efforts to strengthen accountability.
The World Bank said addressing corruption would be important in reducing financial pressure on the government while creating better conditions for investment, economic growth and improved living standards.