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Overview

  • Kenya has made significant political and economic reforms that have contributed to sustained economic growth, social development, and political stability gains over the past decade. However, its key development challenges still include poverty, inequality, climate change, continued weak private sector investment and the vulnerability of the economy to internal and external shocks.

    Kenya ushered in a new political and economic governance system with the passage of a new constitution in 2010 that introduced a bicameral legislative house, devolved county government, a constitutionally tenured judiciary and electoral body. The first election under this new system was held in 2013. The August 8, 2017 presidential elections were nullified on September 1, 2017 by the Supreme Court, and a new presidential election was held on October 17, 2017. President Uhuru Kenyatta was sworn in for a second and final five-year term on November 28, 2017.  

    Over 2015-2019, Kenya’s economic growth averaged 5.7%, making it one of the fastest growing economies in Sub-Saharan Africa. The performance of the economy has been boosted by a stable macroeconomic environment, positive investor confidence and a resilient services sector. 

    The COVID-19 shock has hit Kenya’s economy hard through supply and demand shocks on both the external and domestic fronts and caused activity to slow sharply in 2020 (real gross domestic product is estimated to have contracted by 0.3% in 2020). Agricultural output grew robustly, but manufacturing and many services subsectors (e.g., tourism, education) were severely disrupted. 

    A regional locust infestation, which started early 2020, also affected some parts of Kenya, especially the North East. Nevertheless, moving into 2021 a significant economic recovery has been underway, although it remains highly uneven across sectors (with some, such as tourism, remaining under severe pressure), and there continues to be elevated uncertainty regarding the outlook. The downside risks include a weaker than expected global economic recovery undermining Kenya’s export, tourism and remittance inflows, renewed disruption to domestic economic activity from the pandemic, fiscal slippages, and weather-related shocks.  

    World Bank support to Kenya’s pandemic response includes emergency funding to strengthen medical services and reduce the spread of the virus, as well as budget support to help close the fiscal financing gap while supporting reforms that help advance the government’s inclusive growth agenda.  

    In addition to aligning the country’s long-term development agenda to Vision 2030, the President outlined the “Big Four” development priority areas for his final term as President prioritizing manufacturing, universal healthcare, affordable housing, and food security.

    Social Development 

    Kenya has made major gains in social development, including reducing child mortality, achieving near universal primary school enrollment, and narrowing gender gaps in education. Interventions and increased spending on health and education are paying dividends. While the healthcare system has faced challenges recently, including due to COVID-19 (coronavirus), 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. 

    Kenya has the potential to be one of Africa’s success stories, given its growing youthful population, a dynamic private sector, skilled workforce, improved infrastructure, a new constitution, and its pivotal role in East Africa. Addressing the challenges of poverty, inequality, governance, the skills gap between market requirements and the education curriculum, climate change, low investment and low firm productivity to achieve rapid, sustained growth rates that will transform lives of ordinary citizens, will be a major goal for Kenya. 

    Last Updated: Mar 30, 2021

  • The World Bank Group’s Country Partnership Strategy (CPS) 2014-2018 was extended to FY20 through a Performance and Learning Review in 2018, and further extended under the WBG COVID-19 Crisis Response Approach Paper supports the Governments’ second and third Medium-Term Plans spanning 2013-2022, which operationalizes the country’s longer-term Vision 2030. A Systematic Country Diagnostic was completed in FY20 and discussions on a new Country Partnership Framework for 2021-2026 are underway.

    The current International Development Association (IDA)/International Bank for Reconstruction and Development portfolio stands at $7.1 billion in 37 projects: 28 national ($5.1 billion) and nine regional ($2 billion) projects. Transport sector takes the largest of investments at 18% of the portfolio, followed by Macroeconomics, Trade and Investment sectors at 14%. Other investments are in the following: water, energy, ICT sectors, social sectors, urban, agriculture, devolution, governance, justice, law and order, disaster risk management, forced displacements, private sector development, and statistical capacity building.

    Recently approved IDA projects include:

    • COVID-19 Health Emergency Response Project ($50 million – Additional Financing) was approved January 21, 2021. It seeks to prevent, detect, and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness.
    • Horn of Africa Gateway Development Project ($750 million) was approved on September 8, 2020  that aims to improve: (a) the movement of people and goods and digital connectivity and access to social services to communities at designated locations along the targeted sections of the Isiolo-Mandera Regional Road Corridor; and (b) the capacity of selected transport related institutions in Kenya.
    • Second Kenya Informal Settlements Improvement Project ($150 million) approved in August 7, 2020 aims to improve access to basic services and tenure security of residents in participating urban informal settlements and strengthen institutional capacity for slum upgrading in Kenya.

    The International Finance Corporation’s (IFC) investment portfolio in Kenya stood at $887.3 million as of June 30, 2020. Most of IFC’s portfolio is attributable to the financial sector (71%) followed by manufacturing, agribusiness, and services (16%), infrastructure (12%), and funds (1%).

    The Multilateral Investment Guarantee Agency (MIGA)’s gross exposure in Kenya totals $220 million in guarantees covering the energy, financial and services sectors. The four existing projects include support to (i) the subsidiary of Absa Bank of South Africa to support local lending operations; (ii) an 87MW Combined Cycle power plant; (iii) an 83MW HFO plant, and (iv) an off-grid solar home system company operating in Kenya.

    There are four additional projects in MIGA’s pipeline totaling ($382.1 million) in the Roads Annuity Programs, with some located in the north-east part of the country, covering four conflict-affected counties of Mandera, Wajir, Isiolo, and Garissa. In addition, MIGA mobilized $424 million of commercial financing for TDB - Regional Development Bank - to expand its trade finance activities in member countries of which Kenya is a member - including support of COVID-19 (coronavirus) related trade finance transactions. MIGA is also supporting the sponsors of, and working with the Bank and IFC, on the Nairobi-Nakuru-Mau Summit Highway project ($1.5bn)

    Last Updated: Mar 30, 2021

  • Under the Kenya Youth Employment and Opportunities Project, more than 33,000 youth have been trained and undertaken internship; 68% of them are employed.  Another 15000 youth have received business support, either as business grants, training, and counseling, or through helping them network with other youth; 91% of these are employed, with many creating employment for other youth as well. Business grants also helped protect youth businesses during COVID-19.

    Kenya has achieved remarkable progress and developed adequate and diversified generation capacity with close to 90 percent of energy generated from clean sources currently (geothermal, hydro, solar and wind), with the country is ranked 8th globally on geothermal capacity development.  Recent WBG investments in generation have contributed to the generation of 930MW: 280MW from the Kenya Electricity Expansion Project (KEEP), 250MW from the Kenya Private Sector Power Generation Support Project, which, with IDA guarantees, mobilized $432 million in private capital --- and an additional 400MW expected in June  2021 from the Eastern Electricity Highway Project’s support to the Ethiopia-Kenya transmission line.  Kenya has emerged a leader in Sub Saharan Africa in electrification having increased electricity access to 70 percent in 2019 (from both grid and off-grid options) from just 25 percent in 2010. Recent WBG investments have supported connections of 1,057,895 households (KEEP) and 125,000 households (Kenya Electricity Modernization Project).

    Kenyan counties have made significant progress in the provision of health and sanitation services notwithstanding challenges related to the process of devolution. Sanitation performance improved in more than double the number of targeted counties, while the number of skilled birth deliveries totaled over 1.15 million in 2019, an outcome that the IDA funded Transforming Health Systems Project has made substantial contributions.

    The Water and Sanitation Service Improvement Project supported 11,000 water connections benefiting 231,000 people and 7,000 connections to the sewerage system in informal settlements, benefiting some 45,000 people.

    Last Updated: Mar 30, 2021

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

    Last Updated: Mar 30, 2021

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LENDING

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

*Amounts include IBRD and IDA commitments



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Additional Resources