The report estimates that corruption and collusion widen Kenya's fiscal deficit by about 2% of gross domestic product annually. National Treasury Principal Secretary Chris Kiptoo speaking during the launch of Kenya Economic Update by World Bank in Nairobi Kenya could unlock substantial economic growth and raise household incomes by tackling corruption, according to the World Bank.
It said graft pushes up public borrowing needs, raises financing costs and weakens private investment. In its latest Kenya Economic Update, released in Nairobi on Wednesday, the global lender identified corruption and collusion as major constraints to faster, more inclusive growth, arguing that governance reforms offer a relatively low-cost way to accelerate the country's economic transformation.
“Addressing governance constraints represents a significant and low-cost opportunity for accelerating growth as needed to achieve upper-middle income status,” the report says. The report estimates that corruption and collusion widen Kenya's fiscal deficit by about two percentage points of gross domestic product annually, creating additional borrowing requirements that accumulate over time.
According to the bank, the economic cost extends beyond money lost through fraudulent procurement, bribery and the misuse of public resources. "Weak governance also undermines competition, discourages investment and limits the government's capacity to finance infrastructure and essential services without taking on more debt." The World Bank's warning comes as Kenya grapples with high debt-servicing costs, repeated misses on fiscal targets, and pressure to create jobs and improve living standards amid relatively moderate economic growth.
Kenya has increased borrowing substantially since 2013 to finance infrastructure development. However, the resulting debt obligations have narrowed the government's fiscal space, leaving less money available for development spending and social services.