The African Development Bank Group (AfDB) has released a new Country Focus Report (CFR) challenging Kenya to accelerate key reforms to better mobilize and deploy its own capital for development.
The report, “Making Kenya’s Capital Market Work Better for its Development”, outlines roadmap for transforming Kenya’s economy through improved fiscal management, financial sector deepening, and human capital investment.
According to the report, Kenya’s economy grew by 4.6% in 2024, outperforming the global average of 3.3% despite weak industrial activity, subdued investment, and ongoing climate-related shocks.
The CFR projects that economic growth could reach 5.3% in 2025, driven by stronger agricultural productivity, a growing services sector, and continued implementation of the Bottom-Up Economic Transformation Agenda.
Speaking during the launch of the report, Dr. Kenrick Ayot, senior deputy director at the National Treasury, praised the progress already made in stabilizing key macroeconomic indicators.
“The strong growth reflects the impact of sound and deliberate policies as well as the resilience of our well-diversified economy,” he said.
Ayot also noted an improvement in inflation, which dropped from 9.6% in 2022 to 3.8% in May 2025, and an appreciation of the Kenyan shilling from Ksh.159.7/USD in early 2024 to Ksh.129.3/USD by mid-2025.
However, despite this progress, the report flagged several deep-rooted structural challenges, including the county’s capital which remains underutilized and unevenly distributed, with issues such as high public debt, limited financial access for small businesses, degraded natural capital, and poor learning outcomes.
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Caroline Ntumwa, the Bank’s Country Economist for Kenya, said the country could do better if it focussed more on capital deployment.
“Kenya has made progress in infrastructure and financial access, but weaknesses in capital deployment, especially in human and natural capital, continue to slow development,” she said.
AfDB Recommendations
Broadening the tax base has proved to be a challenged for the Kenya’s successive governemnt, the latest being the Finance Bill, 2024 which triggered unrest among youthful Kenyans over overtaxation.
The government aimed to raise Ksh.302 billion through various proposed taxes in the controversial Bill. It was later dropped by President William Ruto following deadly protests on June 25, 2025.
More than 60 people died in protest to high taxation.
The CFR suggests the country could chat a different path to expand tax bracket through digital systems and informal sector integration, improving access to affordable credit.
It could also leverage scaling value addition in agriculture and mining, and aligning education with future job markets, particularly in green growth, manufacturing, and digital innovation.
The report also calls for stronger public-private partnerships, inclusive capital strategies, and institutional reforms to foster long-term, equitable development.
