President William Ruto addresses the media at State House, Nairobi on November 24, 2025.
President William Ruto faces a complex year as he shifts gears for the final lap to deliver on his economic pledge, stepping into 2026 with hits and misses amid scarce resources to act on unfulfilled promises.
Generally, the economy is projected to witness a good run in the new year with businesses upbeat about expected high demand that looks set to trigger creation of jobs, on falling inflation and interest rates.
Inflation has fallen from 9.6 per cent in October 2022 to 4.5 per cent last month, easing pressure for consumers who endured a high cost of living since when the Covid-19 pandemic struck in 2020.
The Central Bank of Kenya (CBK) has also cut the base lending rate at least eight times since last year lowering it from 13 percent to 9.25 per cent by October 2025, triggering a growth in lending by banks to businesses.
The macroeconomic trends have seen the World Bank review Kenya’s Gross Domestic Product (GDP) growth prospects for 2025 from 4.5 per cent to 4.9 per cent, setting the stage for business activity to intensify in the new year.
“Signs of recovery are emerging,” the World Bank said last month as it raised Kenya’s GDP growth projections for from 4.5 per cent in May.
The Central Bank of Kenya (CBK) headquarters in Nairobi.
While the general economy looks set to support the new year, however, a keen look at the performance of programmes the President promised to deliver for Kenyans shows that though some are slowly taking shape, others are struggling and look unlikely to hit targets, a crucial headache as he gears up for re-election.
A promise to establish 47 County Aggregation and Industrial Parks (CAIPs) by June 2025, for instance flopped, with all of the CAIPs incomplete to date.
Only 10 counties had been fully funded by the national government to construct CAIPs by June while 24 more are scheduled to receive the full funding from the national government in the current fiscal year.
Under the CAIPs programme, counties and the national government co-fund Sh250 million each for the construction and upon completion they are expected to spur manufacturing and value addition.
In the Housing sector, the government completed 8,367 houses between September 2022 and December 13, 2025, against a target of 200,000 houses annually.
The State says the construction of 234,910 houses is ongoing and that the plan is to complete 500,000 houses by June 2029, a target requiring the government to complete 124,000 houses every year since July 2025.
“Since 2022, more than 480,000 jobs have been created, with more than 1 million expected over the program's duration,” the State Department for Housing said in a statement on December 13.
The housing programme has been behind schedule as the State blamed legal hurdles for a slow start in 2023 and 2024, a major problem for one of President Ruto’s economic pledges.
A rapid sprout of construction sites across the country this year has, however, convinced the World Bank to review Kenya’s economic growth outlook, implying more houses could be completed in 2026.
The latest Stanbic Bank Kenya’s Purchasing Managers Index (PMI) has also showed that rebounding consumer demand has lifted private sector activity, helping firms sustain jobs and employ more workers.
The PMI, which interviews about 400 corporate managers, says firms added staff for much of 2025 in response to recovering sales and improving business confidence, with job creation in the last quarter ranked among the fastest in more than two years.
“Employment levels ticked up at one of the fastest rates this year due to the improving economic conditions,” said Christopher Legilisho, an economist at Stanbic Bank.
While companies have been hiring, they have, however, not kept up with raising wages for workers, leaving many struggling to make ends meet as commodity prices rise.
The Stanbic PMI observed that up to 99 percent of companies did not report a change in wages in most of the moths through 2025.
This explains a problem that has faced Kenyan workers for years, who have continued to endure declining real wages, as employers are reluctant to burden themselves with more payroll costs.
Headache for the Head of State
In 2024, monthly real wages for Kenyan workers fell for the fifth year in a row after declining by 0.3 percent to stand at Sh55,451, underlining the erosion of purchasing power for most bread winners.
“Real average annual earnings per employee in the private sector increased from Sh686,500 in 2023 to Sh689,300 in 2024. However, real average annual earnings for employees in the public sector declined to Sh614,300 over the same period,” the Kenya National Bureau of Statistics (KNBS) said.
The Federation of Kenya Employers (FKE) has been categorical that raising workers’ compensation to cover inflation will only resume when productivity starts growing faster than the cost of living, which still remains unforeseeable.
The above challenges have formed a crucial headache for the Head of State, who has been unable to introduce new taxes to finance his development programmes, after earlier attempts in 2024 and 2025 sparked public protests.
In the year starting July 2026, Treasury has already indicated plans to cut Sh96 billion from its tax target, underlining the fear to spark more protests, and please voters ahead of the 20-27 elections.
John Mbadi, the Cabinet Secretary for National Treasury and Economic Planning.
Treasury had initially planned to raise Sh2.99 trillion in taxes during the fiscal year but lowered the target to Sh2.9 trillion, the Budget Policy Statement states.
Faced with a Sh1.1 trillion budget deficit during the year, the government plans to sale more state corporations and stakes in companies such as Safaricom to raise alternative cash for funding projects.
Treasury had planned to raise Sh149 billion through privatisation of state corporations during the current fiscal year, including the listing of Kenya Pipeline Company at Sh100 billion, but none has been sold so far.
The sales are geared towards cushioning the government from borrowing more to finance projects, as proceeds of the privatisation would go to attracting private cash for investment in projects.
Kenya’s public debt hit Sh12.04 trillion in September, with quarterly debt service since July crossing the half a trillion shillings mark for the first time.
“Total expenditure on public debt in the first three months of FY (fiscal year) 2025/26 amounted to Sh507.98 billion, compared to Sh325.52 billion recorded in a similar period of FY 2024/25,” the Controller of Budget (CoB) said in her July-September 2025 quarterly report.
A Standard Gauge Railway (SGR) train at the SGR Nairobi Terminus Syokimau on August 14, 2024.
The government has veered off its plan of balancing borrowing from domestic and external markets with the planned borrowing of Sh613.5 billion domestically and Sh287.4 billion from external markets during the current fiscal year.
The State wants to borrow Sh901 billion in the year ending June 2026 after borrowing Sh1.03 trillion during the previous year. It would then borrow Sh1.1 trillion in the year starting July 2026.
This puts the overall borrowing through three years to June 2027 at Sh3 trillion.
The huge borrowing even as debt service costs continue rising has seen Treasury negotiate repayments of some of the debts, including some three loans borrowed from China for the construction of Standard Gauge Railway (SGR), whose repayment has since been extended by five years to 2040 after they were converted from Dollar to Yuan denomination.
China, one of Kenya’s largest bilateral lenders, is shifting from pumping more credit to fund infrastructure projects, amid concerns of possible defaults across the continent in the near future.
The government, thus, finds itself at a crucial intersection where borrowing more and raising taxes is almost an impossibility, but it still must deliver on its pledges for the President to launch an effective campaign for 2027 re-election.
“We cannot continue funding essential infrastructure through unsustainable borrowing or burdening taxpayers with additional taxes. But neither can we afford to postpone these imperatives without risking our future,” President Ruto said during an address to parliament in November.
In the investment segment, foreign investors have continue to exit the market, though the rate slowed down this year as compared to 2024.
Foreign investors made net sales of Sh12.2 billion at the Nairobi Securities Exchange (NSE) this year, compared to Sh19.5 billion in 2024.
“We have now had two consecutive years of positive returns at the NSE, but in 2025, the gains were broader across the different segments of the market. Notably, the performance was driven by local investors. Foreign investors reduced the volumes of net sales in their portfolios,” noted Ronnie Chokaa, a senior research analyst at Capital A Investment Bank.
