Reducing Corruption Could See Kenya's Debt Fall by 18% - World Bank Report

The World Bank says Kenya could significantly reduce its public debt burden, create millions of jobs and improve household incomes by tackling corruption.

The lender in its Kenya Economic Update report released on Wednesday, November 4 2026, estimated that anti-corruption reforms could also reduce the country's debt-to-GDP ratio by up to 18 per cent.

According to the World Bank, as of June 2026, gross public debt stood at 69.9 percent of GDP, which it noted was elevated.

“Kenya’s public debt stock remained stable at 69.9 percent of GDP in June 2026, despite a decline in external debt reflecting lower external borrowing and gains from a stable exchange rate,” read the report in part. 

“However, domestic debt increased in FY2025/26 and accounted for 56.2 percent of total debt, amid increased domestic borrowing. This trend has deepened sovereign-bank linkages, increased refinancing risks, raised interest costs, and may constrain the availability of credit to the private sector.”

Treasury records show that as of June 2026, Kenya’s outstanding debt stood at Ksh13.1 trillion.

Among the top lenders were World Bank at Ksh1.7 trillion and China at Ksh619 billion.

At the same time the lender added that anti-corruption reforms would creating more and better jobs for up to 7.7 million people.

“Moreover, the required improvements are within reach: The improvements assumed under the moderate and even stronger scenarios are within the range already achieved by several peer countries, including Tanzania, Cote d’Ivoire, and India,” the report noted.

“In earlier decades, anti-corruption and public administration reforms laid the foundation for economic transformation in fast-growing economies in Asia. initially in Singapore and the Republic of Korea and later in Malaysia and Vietnam.”

How Corruption Increased Kenya's SGR Costs

As an example of how governance failures can inflate the cost of major infrastructure projects, the report cited to the Standard Gauge Railway (SGR).

According to the World Bank, the Mombasa-Nairobi railway cost approximately Ksh988 million (USD7.6 million) per kilometre, compared to about Ksh741 million (USD5.7 million) for Tanzania's Dar es Salaam-Dodoma railway and Ksh689 million (USD5.3 million) for the Djibouti-Addis Ababa line.

The lender estimates that Kenya could have saved up to Ksh116 billion (USD900 million) if its railway had been built at the same cost per kilometre as Tanzania's.

While differences in terrain and technical specifications can influence construction costs, the report attributed at least 30% of the potential savings to governance challenges.

“Of this amount, at least 30 percent is considered attributable to governance challenges, the preference for direct contracting rather than competitive tendering; land speculation; and outright fraud around titling, valuation, and compensation payments, rather than topographic or technical differences,” the report added.

Corruption in Power Deals

The World Bank also identified weaknesses in the electricity sector, particularly in the procurement and management of Power Purchase Agreements (PPAs) between Kenya Power and independent power producers.

The report noted that high-cost power purchase agreements, take-or-pay clauses and capacity charges have contributed to the high cost of electricity in Kenya.

It cited findings showing that only 24% of 42 power purchase agreements signed by Kenya Power were known to have undergone a competitive process.

The lender also raised concerns about opaque beneficial ownership structures and potential conflicts of interest involving individuals connected to the energy sector.

These governance challenges have contributed to high electricity costs for businesses. The report noted that power prices for Kenyan businesses are more than twice those in Vietnam and nearly 50% higher than in Uganda.

How Corruption Affects Businesses and Informal Workers

Beyond major infrastructure and energy projects, the World Bank highlighted how corruption affects ordinary businesses and workers.

In 2025, 39% of firms in Kenya considered corruption a major or severe constraint to doing business, up from 25% in 2013. The report also found that 36% of firms had experienced at least one request for a bribe in the preceding year.

Informal workers, including boda boda riders, were also found to lose a significant portion of their daily earnings to bribes demanded by traffic police.

“Informal workers face demands for bribes from frontline institutions such as traffic police, inspection services, and municipal agencies. Reports put the share of bribe fees paid by riders at 5–20 percent of daily earnings (Ksh50–100 daily, plus occasional larger bribe demands),” the World Bank added.

Corruption Reforms Recommended by the World Bank 

To address these challenges, the World Bank recommended strengthening public procurement transparency, improving oversight of government contracts and enforcing accountability in public institutions.

It also called for better disclosure of beneficial ownership to establish who ultimately benefits from government contracts, alongside stronger follow-up on recommendations made by the Auditor-General.

In the energy sector, the lender called for improvements in the governance of power purchase agreements to ensure greater transparency and value for money.

The report further recommended decriminalising minor traffic offences and introducing instant fines to reduce opportunities for police harassment and bribery.

Other proposed measures include strengthening tax administration, reviewing exemptions and improving public spending controls.

The World Bank warned that Kenya's long-term development ambitions, including its vision of becoming a Singapore-like economy, will depend on its ability to undertake a wider governance transformation.

Meanwhile, the lender raised its 2026 growth forecast to 4.6% from 4.3%, citing stronger-than-expected economic performance in the first half of the year.