Kenya’s Economy: From Recovery to Growth Amid Fiscal Pressures

Kenya, 19 December 2025 - Kenya’s economic narrative in 2025 is one of cautious optimism mixed with growing scrutiny. Government leadership, led by Spokesperson Isaac Mwaura, has publicly declared that the nation is shifting from economic recovery to sustained growth, citing reforms designed to spur job creation and strengthen livelihoods.

At the same time, independent data from the Central Bank of Kenya (CBK), the National Treasury/Controller of Budget, and recent Auditor-General audits reveal structural and fiscal pressures that could temper this optimism.

In a widely circulated statement, Isaac Mwaura outlined what government officials consider significant strides toward economic renewal, emphasising job creation and inclusive growth:

“The government has so far created more than two million jobs across various sectors, firmly shifting the economy from recovery to sustained growth. Kenya is deliberately transitioning from a Third World economy defined by exclusion to a First World economy anchored in economic freedom, productivity, and shared opportunity,” Mwaura said.

Mwaura also underscored the targeted support for youth employment:

“820,000 young people are set to benefit from the NYOTA Programme through apprenticeships, certification, grants, savings, and access to government procurement opportunities.”

And, stressing policy coherence beyond mere numbers:

“Taken together, these measures reflect a coordinated effort to stabilize Kenya’s economy while ensuring that growth translates into tangible opportunities for young people,” he said.

These official quotes encapsulate the government’s public narrative, that targeted reforms are generating jobs and driving inclusive economic progress.

The Central Bank of Kenya (CBK) has played a central role in the macroeconomic backdrop. Throughout 2025, the Monetary Policy Committee maintained an accommodative stance, cutting the policy rate multiple times as inflation remained well within the 2.5%–7.5% target band. Most recently, Kenya’s benchmark rate was trimmed to around 9.50%, marking a series of rate cuts aimed at stimulating private sector lending amid subdued investment. The CBK’s actions reflect a balancing act, containing inflation while trying to encourage lending to businesses.

However, economists note that lower borrowing costs do not automatically translate into broad uptake of credit, especially where private firms remain cautious and non-performing financial obligations still present challenges.

Public Financing and Fiscal Pressures

Despite the upbeat government rhetoric, independent fiscal reports paint a sobering picture of Kenya’s public finances:

Recent fiscal data show that the National Treasury acquired over KSh 1.1 trillion in funds during the last financial year, pushing Kenya’s total financial obligations to about KSh 11.7 trillion, equivalent to roughly 67.8% of GDP. This financing was composed of both domestic and external sources, with domestic obligations now forming a substantial share of the total portfolio, a trend that increases exposure to short-term refinancing costs and interest-related outlays.

Excessive reliance on short-term financing has raised servicing costs. In one recent report, a significant share of domestic servicing obligations was absorbed by accrued charges alone, straining revenue flows and narrowing fiscal space.