NAIROBI, Dec 2 (The African Portal) – The World Bank has warned that Kenya’s rising public debt and shrinking fiscal space could threaten the country’s broader development goals, calling for urgent reforms in public finance.
According to the World Bank’s latest Public Finance Review for Kenya, dated December 1, 2025, the country’s public debt now stands at nearly 68 per cent of GDP, with debt servicing consuming over a third of government revenue.
“The Public Finance Review for Kenya highlights that the country’s fiscal challenges are deeply tied to its broader development goals. Rising debt and shrinking budgets are symptoms of a larger problem: how Kenya mobilises, allocates, and transforms resources into jobs, productivity, and inclusive growth,” the report states.
It adds: “It will be difficult to maintain the current path of rising debt and fiscal slippage, but there is another way.”
The review notes a decline in tax collections from 16.2 per cent of GDP in FY2016/17 to just above 14 per cent, even as approximately 800,000 new workers enter the labour force annually.
This shortfall has limited investments in infrastructure, education, and health. Between 2011 and 2019, total productivity growth remained stagnant, while job creation stayed concentrated in low-productivity informal sectors. Real wages have fallen by more than 13 per cent since 2019.
Key fiscal reforms proposed
The World Bank outlines five reform priorities to address Kenya’s fiscal challenges. These include:
- Strengthening governance and reducing leakages through improved procurement and anti-corruption measures
- Creating a more competitive private sector by simplifying corporate taxation and leveraging the African Continental Free Trade Area (AfCFTA)
- Reducing fiscal risks from state-owned enterprises (SOEs) through divestiture and better governance
- Retargeting subsidies to benefit the most vulnerable
- Transforming urban fiscal policy through property and land taxation, coupled with improved infrastructure.
Economists say that if implemented, these measures could reduce Kenya’s debt-to-GDP ratio to about 44 percent by 2035, compared to a continued rise under current trends. Growth would accelerate, real wages would recover, and better jobs would emerge in higher-productivity sectors.
Urgency of implementation
The report stresses the importance of sequencing reforms, with short-term measures to restore credibility, medium-term broadening of the tax base and SOE restructuring, and long-term institutionalisation of reforms.
“A narrowing window,” the economists warn, referencing the June 2024 protests against the Finance Bill as a broader demand for accountability and opportunity. “Without reform, Kenya risks deepening its debt and alienating a generation. With it, the nation can chart a more inclusive and hopeful path.”
Credit: Peopledaily
