Kenya is losing up to Sh194 billion every year to corruption and illicit financial flows, draining resources that could uplift critical sectors like health, education and infrastructure, a new report by the African Development Bank (AfDB) has revealed.

According to the African Economic Outlook Kenya Country Focus Report released in Nairobi on Wednesday, the country is also suffering losses of at least Sh650 billion annually due to inefficiencies in public spending, amounting to five per cent of the nation’s gross domestic product.

In addition, tax exemptions and incentives are causing a further revenue loss of Sh105 billion each year.

These combined losses, the AfDB says, are weakening Kenya’s ability to fund its own development, forcing the country to rely heavily on borrowing.

The report points out that interest payments on loans now exceed allocations to education and health.

“Corruption and illicit financial flows cost the East African nation as much as $1.5 billion annually (Sh193.6 billion) – funds that could transform health, education, and infrastructure development,” the report reads.

The report warns that state capture where influential political figures control lawmaking and its enforcement, is eroding the rule of law and creating unpredictability that is scaring away investors and holding back private sector growth.

“Investors fear biased rulings, delays, and lack of transparency, increasing operational risks and deterring investment,” AfDB said.
“Ultimately, the rule of law, upheld by robust law enforcement and an independent judiciary, remains the foundation for sustained economic growth, social equity, and public trust in governance.”

AfDB’s estimate is more conservative than that of the Ethics and Anti-Corruption Commission (EACC), which reported that Kenya loses about Sh608 billion annually—an equivalent of 7.8 per cent of its GDP—to corruption.

In terms of global standing, Kenya continues to fare poorly in transparency and governance.

Last year, it was ranked among the bottom third in Transparency International’s Corruption Perceptions Index (CPI), grouped alongside countries like Sri Lanka, Angola, Ecuador and Uzbekistan.

The 2024 index placed Kenya at position 121 out of 180 nations, scoring 32 out of 100 only a marginal rise from 31 in 2023.

The country’s score remains below the Sub-Saharan Africa average of 33 and far below the global average of 43. A score under 50 points to widespread corruption in the public sector.

Kenya’s score on the CPI has remained largely unchanged over time, with only a one-point improvement between 2020 and 2024. Since 1996, the country’s average ranking has been 125.57, with the worst performance recorded in 2010 at position 154, and the best in 1996 at 52.

Despite these persistent governance concerns, AfDB projects that Kenya’s economy will grow by five per cent in 2025, up from 4.7 per cent in 2024. The growth is expected to be driven mainly by agriculture and services. However, the bank expects a slight slowdown in 2026 to 4.8 per cent.

The report cautions that this growth has not been fully inclusive.
“Rising poverty, high unemployment, and growing inequality indicate that Kenya’s economic growth has not been fully inclusive,” the report warns.

AfDB’s outlook is similar to Kenya’s own projections but more optimistic than those of the World Bank and the International Monetary Fund, both of which expect GDP growth to ease to 4.8 per cent.

For Africa as a whole, AfDB projects that GDP will increase from 3.3 per cent to 3.9 per cent in 2025 and reach four per cent in 2026. The bank attributes the slower pace to the expected consequences of the ongoing global tariff war, led by Washington, which could hurt African exports and disrupt value chains.