The World Bank has urged Kenya to tackle corruption, warning that graft is undermining economic growth and limiting income gains, even as it raised its 2026 growth forecast following stronger-than-expected economic performance in the first half of the year.
Kenya, which became a lower-middle-income country under the World Bank’s classification in 2014, continues to lag behind its peers on widely used governance indicators.
“Governance challenges are increasingly limiting Kenya’s prospects for faster and more broadly shared growth, with corruption as the key binding constraint,” the Washington-based lender said in its latest biannual Kenya Economic Update report.
Corruption and collusion cost the country an estimated 2% of its gross domestic product annually through higher fiscal deficits, the World Bank said.
“This translates into substantial additional borrowing needs accumulating over time,” it said.
The International Monetary Fund said in June that it had shared a draft report examining governance weaknesses and corruption vulnerabilities with the Kenyan government, following a request from Nairobi to assess the issue.
The government is also rolling out an electronic procurement platform, which it says will help reduce opportunities for corruption and wastage. It has also signed a conflict of interest bill.
Kenya has faced mounting debt repayment obligations in recent years after increasing borrowing from 2013 to finance infrastructure projects. The country has also repeatedly missed its fiscal deficit targets.”Corruption risks contribute to a higher cost of borrowing,” the World Bank said, citing a “governance premium” on sovereign borrowing.
Despite its concerns over governance, the lender raised Kenya’s economic growth forecast for 2026 to 4.6%, up from its earlier projection of 4.3%, following faster-than-expected growth in the first six months of the year.
However, it warned that fiscal slippage could push up public debt. The country is also scheduled to hold a general election in August 2027, which could heighten uncertainty, discourage investment and tourism, and increase pressure on public spending, the World Bank said.
