Kenya’s fiscal trajectory is precarious amid heightened debt vulnerabilities ahead of its 2027 general election

NAIROBI: ACCORDING to the Afrobarometer report, based on surveys conducted by experts from the University of Nairobi in Kenya, Kenya’s economy is no longer robust and competitive relative to most countries in the East Africa region, suggesting that Kenya has unquestionably lost its position as an economic centre stage to other emerging EA economies.

Setting aside the heated political situation, which isn’t my primary concern, as politics is its own domain for Kenyan politicians ahead of the 2027 General Election, Kenya is in a dire economic situation, as evidenced by the recent World Bank report, which ranked it the 10th-poorest country in the world.

This is particularly evident in the Afrobarometer report, which presents findings from surveys conducted by experts at the University of Nairobi in Kenya.

Afrobarometer is a Pan-African, nonpartisan survey research network that provides reliable data on African experiences and evaluations of democracy, governance and quality of life. Over the past 27 years, extensive survey rounds have been conducted in up to 42 countries.

In 2024, Round 10 of the surveys was implemented. Faceto-face interviews are conducted by Afrobarometer’s national collaborators in the respondent’s preferred language.

In April-May 2024, the Afrobarometer team in Kenya, based at the Institute for Development Studies, University of Nairobi, conducted interviews with 2,400 adult Kenyans. Based on decades of experience as data analysts in economic data analysis, a sample of this size yields country-level results with a 95 per cent confidence interval of ±2 per cent.

ccording to the survey, the majority of Kenyans (59 per cent) are unequivocally stating that the country is moving in the wrong direction. This sentiment has been consistently expressed by the majority of Kenyans, as the study findings clearly indicate.

A more thorough examination of the results shows that the perception that Kenya is on the wrong track rises with respondents’ experiences of poverty. This perception ranges from 36 per cent among the wealthiest citizens to 75 per cent among the poorest.

The study also indicates that it is more prevalent in urban areas than in rural areas (64 vs 56 per cent). Further insights emerge from a more detailed examination of the survey’s findings and the impact of government performance on the economy.

In reality, the research indicates that the majority of Kenyans are dissatisfied with the government’s handling of critical economic matters, a sign that shows that the government is receiving poor ratings from a majority of respondents (62 per cent), who believe it is performing badly or very badly in managing the economy with a larger majority of respondents (67 per cent), as per the study, believing the government is not doing a good job of improving the living standards of the poor (75 per cent), creating jobs (76 per cent), and narrowing the gap between the rich and poor (79 per cent) and give the government a poor rating.

Many individuals are unaware that the most significant issues in Kenya that require government action are health (50 per cent), the rising cost of living (38 per cent), and unemployment (25 per cent), as indicated by a publicly available survey in the University of Nairobi library.

According to the study findings, education (24 per cent), crime and security (22 per cent) and corruption (22 per cent) are also cited as main concerns by more than one in five individuals.

The health of citizens aged 35 and older is of particular concern (53-56 per cent), whereas unemployment is the most pressing issue for adolescents (28-31 per cent).

When one puts together the Afrobarometer survey results, one conclusion that can be drawn from an economic perspective is that Kenya’s economy is currently navigating a complex ‘polycrisis,’ with 67 per cent of citizens identifying the economy as the country’s most serious problem Much as Kenyans would like this information to be in the public domain, given their strong economic history, major economic issues troubling the country now include a severe debt crisis, high taxation, inflation and high unemployment, which have led to significant public discontent, as clearly shown by the Afro barometer findings.

I believe Kenya’s elevated public debt distress will remain a significant economic issue in 2026, particularly as the nation prepares for the 2027 General Election. Kenya’s debt has exceeded KSh 12 trillion (approximately 80-90 US dollars billion), with debt servicing consuming 70 per cent of revenue, leaving very little for development, education or health.

The debt-toGDP ratio of 69 per cent is well above the 55 per cent ceiling recommended by the World Bank and IMF.

Kenya has a high cost of living and taxation, in contrast to the other EAC members, which enjoy a low cost of living.

The cost of living will rise, resulting in pervasive dissatisfaction among Kenyans, as a result of increased taxes, including the 2.5 per cent housing levy and the higher VAT on fuel.

Kenya will soon face currency depreciation and inflation if tough decisions are not made. Significant volatility has been observed in the Kenyan shilling, which depreciated by 24 per cent year-on-year in 2023.

This has increased the cost of importing goods and servicing dollar-denominated debt.

The primary menu item will be poverty and unemployment. Youth unemployment is expected to reach 67 per cent, posing a significant obstacle.

Approximately half of Kenyans’ working age are employed in full-time or part-time positions. Some Kenyan analysts have estimated that 70 per cent of the budget is mismanaged, and that corruption and governance issues, including tenderpreneurship, will impose a significant burden on the economy.

The current state of the Kenyan economy is intriguing for researchers interested in learning more, as all indications point to a slowdown in growth. Despite a 4.9 per cent expansion in Q3 2025, the overall pace of economic growth has slowed due to higher interest rates and weak business sentiment.

The projected growth rate for real GDP in 2026 is 4.5 to 5.0 per cent, below the 10 per cent annual growth target outlined in Vision 2030. The dominance of the informal sector is also a primary concern, as the government will be transitioning from stimulus to austerity, which includes dissolving 47 state corporations and reducing budgetary expenditure to manage the debt, as evidenced by their Fiscal Consolidation plans.

The informal sector in Kenya accounts for over 80 per cent of employment and is characterised by low pay and a lack of security.

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This, in turn, restricts tax revenue and exacerbates the disparity between the wealthy and the impoverished.

Without a doubt, Kenya’s trade deficit remains substantial, with imports exceeding exports by approximately threefold. This deficit is primarily due to the country’s reliance on basicmaterial exports.

From an analytical perspective, the economic outlook is subject to substantial risks, including the need for further tax increases to meet IMF programme requirements, political instability and tighter global financial conditions.

Although the government has prevented an imminent default on a 2 US dollars billion Euro bond, the debt’s long-term sustainability remains uncertain.

The most recent Afrobarometer survey results indicate that the majority of Kenyans are dissatisfied with the nation’s economic trajectory. The majority of citizens experienced shortages of essential goods in the previous year, and many were compelled to seek assistance from family or friends to make ends meet.

Thus, it can be argued that despite improvements, Kenya’s fiscal path is fragile amid high debt vulnerabilities and weak revenue growth. The truth that cannot be concealed is that Kenya’s public debt remains at high risk of distress, with interest payments accounting for approximately one-third of tax revenue.

To revitalise a weak labour market and a slowing economy, it is imperative to implement reforms that promote inclusive growth and employment while strengthening fiscal sustainability in an equitable manner.

Some macroeconomic indicators have improved, as shown in the most recent World Bank Kenya Economic Update: Special Focus on Poverty and Distributional Impacts of Fiscal Policy in Kenya.

However, further effort is required, as the World Bank projects growth to rise from 4.5 per cent in 2025 to approximately 5.0 per cent in 2026–27. In brief, the economic slowdown is driven by a combination of factors, including high interest rates, subdued business sentiment and reduced development expenditure in response to protests.

Growth is further impeded by weak industrial activity, sluggish private consumption and policy uncertainty that constrains investment and formal employment growth, despite resilient agriculture, strong remittance inflows and a rebound in services.

In the past year, Kenya’s current account deficit decreased to 3.1 per cent of GDP, in part due to a 19 per cent increase in remittances and a revival in exports, particularly agricultural goods and re-exports.

Nevertheless, the tradable sectors underperformed, as services exports were weakened by declining travel receipts, and tea and manufactured exports saw their share of GDP decline.