NAIROBI, Kenya — The World Bank has cut Kenya’s GDP growth forecast to 4.3%, marking the lowest projection since the country experienced a 0.3% contraction in 2020. As the East African nation navigates this economic downturn, experts emphasize that unpredictable tax policies, persistent governance challenges, and restricted data access are severely stifling private sector growth and investor confidence.
According to economists at the Bank, the fallout from Israel’s and the United States’ war on Iran threatens to push an additional 1 million to 2.4 million Kenyans below the $3 per person per day poverty line. This external economic pressure compounds a long-standing domestic issue: the private sector’s ability to create new jobs has slowed significantly over the past 15 years.
X.N. Iraki, an expert at the University of Nairobi, points out that both local and foreign investors are deeply unsettled by the current tax regime. Frequent changes in taxes and high compliance costs make it exceedingly difficult for entrepreneurs to plan long-term expansions. This widespread frustration over unpredictable and unconsulted tax policies was a primary catalyst for the massive street protests that swept across Kenya in 2024.
A significant missed opportunity lies in the unimplemented 2023 medium-term revenue strategy. The strategy originally proposed a comprehensive gamut of tax policy changes, including adjustments to income, excise, VAT, and the treatment of pensions. However, three years later, most of these ideas—including promised tax cuts—remain unimplemented. Iraki notes that this delay incurs a massive opportunity cost, preventing the country from creating a conducive environment for internal and external stakeholders. Instead, small and micro-enterprises are being overtaxed in an unpredictable environment, which Iraki describes as “killing the golden egg.”
Beyond taxation, the World Bank’s report routinely highlights the urgent need to improve poor governance in Kenya. While Parliament passed the Conflict of Interest Act last year to replace the Public Officer Benefits Act, questions remain about its efficacy in rooting out conflicts of interest and providing citizens with adequate visibility into the assets of politicians and civil servants.
Transparency is a key ingredient for economic growth, yet current laws present significant roadblocks. Section 36 of the new law theoretically mandates that information should be available to the public, but it requires individuals to approach a specific government agency and prove a vaguely defined “legitimate interest.” Iraki argues that this clause acts as a major hurdle to making information publicly available by default.
As a researcher, Iraki highlights that accessing data is one of the biggest challenges faced when guiding investment decisions. Whether local or foreign, investors and entrepreneurs require accurate, unhindered information regarding material sourcing, financing, exports, and government subsidies. “Why should we hold data when it is all that we need to make decisions?” Iraki questioned, urging that the law be amended to remove these roadblocks and ensure open access to the data necessary for appropriate economic growth.
