Overview

The East African nation of Kenya has an estimated population of 46.1 million, which increases by one million a year. With support of the World Bank Group (WBG), International Monetary Fund (IMF) and other development partners, Kenya has made significant structural and economic reforms that have contributed to sustained economic growth in the past decade. Development challenges include poverty and inequality, and vulnerable of the economy to internal and external shocks.

Political Context

Devolution is rated the biggest gain from the August 2010 constitution, which ushered in a new political and economic governance system. It is transformative and has strengthened accountability and public service delivery at local levels. The government’s agenda is to deepen implementation of devolution and strengthen governance institutions, while addressing other challenges including land reforms and security to improve economic and social outcomes, accelerate growth and equity in distribution of resources, and reduce extreme poverty and youth employment.

Economy

Kenya’s growth is projected to rise to 5.9% in 2016 and 6.1 % in 2017. The positive outlook is predicated on infrastructure investments. Fiscal consolidation is expected to ease pressure on domestic interest rates and increase credit uptake by the private sector. The contraction in the current account deficit will continue to be supported by declining commodity prices and rising exports of tea.

Sound monetary policy restored stability in the currency markets and contained the 12-month average overall inflation at 6.6% in December 2015. The Central Bank effectively managed currency volatility and running down Forex reserves to cushion the shilling. So, the Kenya shilling stabilized, and the depreciation moderated in comparison to other regional currencies.

Low commodity prices had a net positive impact in Kenya in 2015. The gains through low oil prices and the rising earnings from tea have offset the loss in earnings from other exports (coffee and horticulture). As a result, the current account deficit contracted from 10.4% to 7.1% of GDP.

According to the October 2015 Kenya Economic Update, Kenya is poised to be among the fastest growing economies in Eastern Africa. Besides, the 2016 Country Economic Memorandum says that Kenya’s growth prospects will depend a lot on Innovation, Oil, and Urbanization on the long term.

Social Developments

Kenya has met a few of the Millennium Development Goals (MDG) targets, including reduced child mortality, near universal primary school enrolment and narrower gender gaps in education. Interventions and increased spending on health and education are paying dividends. Devolved health care and free maternal health care at all public health facilities will improve health care outcomes and develop a more equitable health care system.

Development Challenges

Kenya has the potential to be one of Africa’s great success stories from its growing and youthful population, a dynamic private sector, a new constitution, and its pivotal role in East Africa.  Addressing challenges of poverty, inequality, governance, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform the lives of ordinary citizens, will be a major goal for the country. 

Last Updated: Apr 08, 2016

The World Bank Group’s (WBG) strategy for Kenya is to support the government’s strategy of ending extreme poverty and increasing shared prosperity. The WBG’s Kenya Country Partnership Strategy FY14-18 (CPS) focuses on improving the economy’s competitiveness and sustainability, protecting and helping the vulnerable to develop their potential, and building consistency and equity through devolution. During the CPS period, the WBG plans investment of $1 billion a year in Kenya, through the International Development Association (IDA), International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA).

The current International Development Association (IDA) portfolio amounts to nearly $5.5 billion in 27 national projects ($4.2 billion) and -six regional projects ($1.3 billion). This includes a new commitment of $200 million in Kenya Devolution Support Program-for-Results approved in March 2016.

The largest commitments are in infrastructure, which are the foundations for reducing the cost of doing business and improving Kenya’s competitiveness in the East African Community (EAC), and globally. Other priorities include devolution, public administration, law and justice, focusing on reform and governance, and investing in people through health and social protection programs. Knowledge and analytic work in key areas are also part of the strategy.

IFC

IFC supports Kenya’s private enterprises through direct investments, advisory services and capital from global financiers.

Since it started operating in Kenya, IFC has invested close to $1 billion in the country’s agribusiness, infrastructure, financial markets, health and education.  Its investments in a range of companies include in Kenya Airways, the Kipeto wind farm, Bridge International Academies, National Cement, AAR Healthcare and Vegpro.

IFC’s clients and partners are tackling pressing development challenges, including access to power, healthcare and food. Small businesses are engines for Kenya’s growth, creating jobs and providing essential goods and services, but entrepreneurs are often unable to access finance IFC’s Africa Micro, Small, and Medium Enterprise Finance Program helps banks increase business with the SME sector.

IFC invests directly in banks to increase lending to entrepreneurs, and advises them on how to tailor their financial services for SMEs. Its partners in Kenya include Equity Bank, Gulf African Bank, Bank of Africa, Diamond Trust Bank and Kenya Commercial Bank. IFC and the World Bank also work closely with the government to improve business regulation through reforms in registering businesses, getting credit and other areas.

Multilateral Investment Guarantee Agency (MIGA)

MIGA is providing investment guarantees of $302 million in support of projects in Kenya’s infrastructure, power, agribusiness and service sectors. Working closely with the Bank and IFC, it helps to leverage financing for construction of privately operated power plants to diversify Kenya’s energy mix in line with the government’s least cost power development plan. MIGA is receiving increasing interest from other investors and sectors in the country.

Last Updated: Apr 08, 2016

The World Bank Group (WBG) has contributed to Kenya’s development in all major economic and social sectors including the following:

Energy

Multi-faceted support by the World Bank through the Kenya Informal Settlements Improvement Project (KISIP), the Global Partnership on Output-Based Aid (GPOBA) and the Energy Sector Management Assistance Program (ESMAP) enabled Kenya Power to connect over 150,000 households in the informal settlements to legal power in just one year up from 5,000 households.

Urban Development

WBG’s $100 million investment in the Kenya Informal Settlements Improvement Project (KISIP) has increased access of more than 200,000 people to paved roads, drainage systems, high mast flood lights, and improved water and sanitation services. It has also provided strengthened security of tenure for nearly 10,000 people. By the end of the project in June 2016, over one million residents of informal settlements are expected to benefit from improved infrastructure, services, and security of tenure. 

Water and Sanitation

WBG’s $300 million investment in the Water and Sanitation Services Improvement Project (WaSSIP) has provided 1.3 million people with access to improved water sources - including 100,000 in informal settlements.  It has also provided 212,000 people with connections to the sewage network.  By the end of the project in June 2016, WaSSIP is expected to benefit some 3.3 million people.

Social Protection

Through the National Safety Net Program for Results and Cash Transfer for Orphans and Vulnerable Children, the WBG has helped to address Kenya’s social challenges through investments in social protection. These programs, supported by the WBG and other partners, have built sustainable livelihoods for the poor and vulnerable, engaged them in productive activities, increased dietary diversity, improved their access to health care, and also contributed to better education outcomes for poor and vulnerable children. As of 2015, 2.6 million individuals are benefiting from cash transfer support through the National Safety Net Program, up from 1.7 million in 2013. Coverage is expected to increase from current 500,000 to 800,000 by end of June 2016. Combined, these programs provide regular, predictable cash transfers to over three million poor and vulnerable households.  

Transport

WBG’s $460 million investment in the Northern Corridor Transport Improvement Project supported the rehabilitation of 400km along the Northern Road Corridor; construction of roadside amenities including five schools; lorry parking facilities and market stalls; supported implementation of HIV/AIDS mitigation measures along the corridor; promoted private sector participation in road management, road safety improvement, and reforms at Kenya Airports Authority, Kenya Civil Aviation Authority, and the Ministry of Transport. The project has reduced travel times from Mombasa port to Timboroa from 14.5 to nine hours. Independent roads entities have been created while aviation sub-sector institutions now have financial autonomy and strengthened oversight aviation security and safety. The project has helped ease cost of doing business, improved business climate, and strengthened regional integration in East Africa Community.

Health

The WBG’s $213 million for Health Sector Support Program credit has helped Kenya Medical Supplies Authority (KEMSA) to reconfigure its business model to respond to the needs of 47 counties in the devolved health system. With the capitalization supported under the project, KEMSA has a self-sustaining model to improve supply of medical commodities to public health facilities. The Project is helping scale-up of results based financing to 21 Arid and Semi-Arid Counties which will help shift emphasis from inputs to tangible results and improve quality of care and reduce inequalities. It is also supporting introduction of Health Insurance Subsidy for the Poor, an important step for achieving Universal Health Coverage, with one million poor expected to be covered under this scheme.

Last Updated: Apr 08, 2016

The World Bank Group (WBG) has established strong partnerships for knowledge and resources with other development partners, researchers and agencies that contribute to Kenya’s development. These include European Union and European Investment Bank, the African Development Bank, France’s Agence Française de Développement, United Kingdom’s Department for International Development, German Development Bank, Japan International Cooperation Agency and China.

Last Updated: Apr 08, 2016


LENDING

Kenya: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments