The World Bank Group headquarters building in Washington, DC, on April 9, 2023.
The World Bank has asked Kenya to shift its focus from raising tax rates to fixing how public money is spent, warning that procurement inefficiencies, weak public investment management and a rising public wage bill are undermining fiscal sustainability and investor confidence.
In its latest assessment of Kenya's economy, the multilateral lender says that improving the composition and efficiency of government expenditure should now be priority.
“Addressing Kenya’s fiscal challenges will require a more balanced policy mix that supports both fiscal sustainability and responsibility, with job-rich growth,” the World Bank said.
“On the revenue side, reforms should prioritise improvements in tax administration, broadening the tax base, and reducing exemptions rather than relying primarily on repeated tax rate increases that could weaken investment incentives and formalisation”
The lender argues that reforms to public procurement, tighter control of recurrent spending and better management of public investments would deliver greater value for taxpayers while creating room for economic growth.
In Kenya, public procurement accounts for about 60 per cent of the country's annual budget. Public procurement has, however, been cited as a major driver of corruption, according to the Corruption Perceptions Index of Transparency International, which ranked Kenya 121st out of 180 countries.
This has seen the World Bank call for stronger fiscal responsibility laws, arguing that credible and enforceable budget rules are essential to restoring confidence in Kenya's public finances.
"On the expenditure side, improving the composition and efficiency of spending will be critical, including through better public investment management, procurement reforms, rationalisation of poorly targeted subsidies, and measures to contain the public wage bill," the World Bank said.
While Kenya already has fiscal responsibility provisions under the Public Finance Management framework, the lender says stricter enforcement is needed to keep borrowing, budget deficits and public spending within sustainable limits.
It said that stronger fiscal rules, backed by greater transparency and accountability, would reassure investors that the government is committed to prudent fiscal management, help lower borrowing costs and create more room for investment in priority sectors that support long-term economic growth and job creation.
“Establishing and enforcing fiscal responsibility laws will be critical to enhancing policy credibility, demonstrating commitment, strengthening investor confidence, improving fiscal discipline, and ensuring sustainable public finances over the medium term,” the multinational lender said.
The Bretton Woods institution has also called for tighter debt management and transparency to facilitate productivity and long-term growth.
“Strengthening fiscal institutions—including cash and debt management, transparency, oversight of contingent liabilities, and monitoring of state-owned enterprises—will also be essential to rebuild policy credibility, reduce borrowing costs, and create fiscal space for productivity-enhancing investments that support long-term growth and employment creation,” the World Bank added.
As of July 2026, Kenya’s total public debt stood at Sh12.83 trillion (approximately 70 per cent of the gross domestic product (GDP).
It further calls for improvements in wage bill management and public investment management systems to reduce inefficiencies and waste.
The national wage bill is estimated at Sh1.2 trillion, which consumes about 40 per cent of the total government revenue. This is above the statutory 35 per cent limit set in the Public Finance Management Act.
Follow our WhatsApp channel for breaking news updates and more stories like this.
