World Bank flags Kenya’s debt burden and private sector suppression
The World Bank pointed out that areas such as hospitality, manufacturing, and wholesale and retail trade could be better served by private players, but are instead occupied by state-owned enterprises benefiting from favourable treatment.
The World Bank has raised alarm over Kenya’s increasing involvement in commercial ventures, warning that state dominance in the business sector is stifling private enterprise and weakening the country’s economic resilience.
In its Levelling the Playing Field report released on Tuesday, the lender said government-run companies enjoy regulatory advantages that make it difficult for private firms to compete fairly.
According to the report, more than half of Kenya’s major businesses are operated by the government, often in sectors where private investment could deliver goods and services more efficiently.
The World Bank pointed out that areas such as hospitality, manufacturing, and wholesale and retail trade could be better served by private players, but are instead occupied by state-owned enterprises benefiting from favourable treatment.
“Ethiopia, Kenya, and South Africa have examples of state-owned businesses that benefit disproportionately from favourable regulations, creating an uneven playing field for firms,” the report noted.
It further observed that the issue is not unique to Kenya, highlighting similar trends across the continent.
“State participation in markets that can be effectively served by the private sector further limits prospects. In countries such as Ghana, Kenya, and Uganda, close to or more than half of the sectors had businesses with state ownership operating in them,” it added.
Beyond market interference, the World Bank also flagged Kenya’s growing debt burden as a major risk to its economic stability. Alongside Ethiopia and Ghana, Kenya was listed among the African countries facing rising sovereign debt levels that are eroding previous economic gains.
“In 2024, Ethiopia, Ghana, and Kenya are grappling with high levels of sovereign debt that has undone some of their past success and weakened the link between growth and the pace of poverty reduction,” the report highlighted.
The warning comes just three weeks after the World Bank raised concern over Kenya’s risk of defaulting on its debt if urgent action is not taken to address corruption. In its May 27 report, the lender cautioned that failure to tackle graft could trigger a drop in GDP per capita and increase poverty levels by up to 6 per cent.
