Where is the Money? Why Kenyans Don’t Feel the Effects of Economic Growth in Their Wallets

Kenya has seen promising reports on its economic growth in the last 2 years, with government data regularly highlighting figures that show how inflation has gone low. Why is this growth not translating into tangible improvements in their daily lives? 

In a country where the official reports seem at odds with the lived experiences of many, several factors may explain the disparity.

A similar phenomenon of apparent economic growth not translating to noticeable improvements in the daily lives of citizens did emerge during President Mwai Kibaki’s administration in Kenya (2002-2013).

Kibaki’s regime was marked by significant economic reforms that led to impressive GDP growth rates, averaging around 5-7% per year, especially from 2003 to 2007.

The period saw an expansion in infrastructure, telecommunications, and banking sectors, alongside a strengthening of public financial management. The reforms during this era created a more stable economic environment and brought Kenya to middle-income status.

However, many Kenyans still felt economically marginalized, with limited changes in their disposable income and access to essential services.

2. Persistent Unemployment and Underemployment in Kenya 

A significant portion of Kenya’s population, especially among the youth, faces underemployment or precarious work conditions. The high unemployment rate contributes to a cycle where economic opportunities are limited, and many individuals struggle to secure well-paying jobs. This lack of sufficient employment, combined with the rising cost of living, means that even when economy grows, those gains don’t trickle down to the majority of people who aren’t benefiting from formal sector employment.

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Moreover, the informal sector, which employs around 83% of Kenya’s labor force, often fails to provide job security, benefits, or the wage levels found in formal employment. For those in these informal roles, income variability and vulnerability to economic shocks are part of everyday life, making it hard to feel any improvement tied to national growth.

3. Debt Servicing Burden on Public Finances

Kenya’s debt has soared in recent years, resulting in a significant chunk of government revenue going towards debt servicing. In fact, the Treasury allocates about half of its revenue to debt repayment. As more funds go towards paying off both domestic and external loans, fewer resources are left to invest in sectors that could directly improve citizens’ lives, like healthcare, education, or infrastructure that benefits low-income communities.

The debt burden also impacts public spending on social programs and subsidies that would otherwise help ease the cost of living for ordinary Kenyans. Without significant changes, debt repayments will continue to limit the government’s ability to directly alleviate the financial strain felt by the general public.

4. Limited Distribution of Wealth from Key Economic Sectors

Economic growth in Kenya has been heavily concentrated in specific sectors, such as financial services, construction, and technology, while critical sectors for employment like agriculture and manufacturing have lagged. As a result, the wealth generated has not been equitably distributed, and many people working in the agriculture sector, which employs around 40% of Kenyans, find themselves excluded from the benefits of growth in other industries.

Agriculture, often characterized by small-scale farmers, faces numerous challenges including climate change, limited access to finance, and inadequate support services. Without strong linkages between growing sectors and the broader workforce, the wealth generated fails to create the widespread economic improvement necessary to benefit the majority.

5. Corruption and Inefficiencies in Public Spending

Corruption continues to undermine public confidence and diverts funds away from development initiatives. Transparency International consistently ranks Kenya poorly on its Corruption Perception Index, which indicates that public funds are often misappropriated or spent inefficiently. When funds that could build essential infrastructure or fund welfare programs are lost to corruption, the average Kenyan suffers, as these resources are redirected from potentially impactful projects.

Furthermore, these inefficiencies discourage foreign and local investments in certain sectors, limiting job creation and economic opportunities. The resultant economic inefficiency restricts the growth and productivity that could otherwise bring tangible benefits to Kenyan households.

6. Structural Inequities and Economic Exclusion

Finally, structural inequalities rooted in regional, ethnic, and class differences contribute to the uneven economic landscape in Kenya. For instance, rural areas and certain communities have historically been marginalized in terms of access to services, infrastructure, and opportunities. This means that even as the economy grows, the benefits of that growth are disproportionately felt by urban populations or more privileged communities.

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Moreover, gender disparities in access to education, employment, and finance prevent many women from fully participating in and benefiting from economic growth. Until these systemic barriers are addressed, a significant portion of the population will continue to feel left behind, regardless of broader economic gains.

Conclusion: A Need for Inclusive Growth Policies

Kenya’s economic growth figures, though positive on paper, do not yet translate into improved financial wellbeing for the majority of Kenyans. The reasons are complex and interconnected, rooted in high living costs, limited job opportunities, debt burdens, and structural inequities. Addressing these issues requires more than economic growth alone; it calls for targeted policies that foster inclusive development, social protection, and equitable resource distribution. Only through a deliberate focus on these aspects can the “growth” reported by the government start to reflect in the pockets and lives of ordinary Kenyans.

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