Kenya’s government typically relies on monetary and fiscal policies to influence macroeconomic outcomes and stabilize economic growth. The central bank rate moves can influence and manage private sector lending, while the government applies the fiscal policy to direct economic performance. However, monetary and fiscal policies alone are insufficient to fix Kenya’s economy because of challenges deeply-rooted in the nation’s economic, social, political, and cultural systems.
The country faces structural constraints to its economic development and inclusive growth, leading to a situation where many Kenyans do not feel the benefits of economic growth.
Here are the key challenges that make fixing Kenya’s economy incredibly difficult.
In Kenya, traditional monetary and fiscal policies have been insufficient to address the country’s deep-seated economic challenges, such as chronic debt, high cost of living, and stagnant job creation. While a stable macroeconomic environment is necessary, long-term inclusive growth requires Kenya to tackle underlying structural issues and reform its governance.
Key Issues
Broken/dysfunctional families
Broken and dysfunctional families are on the rise in Kenya, as evidenced by the drop in marriage rates, according to the 2024 Kenya Vital Statistics Report by the Kenya National Bureau of Statistics. The proportion of married women aged 15 to 49 dropped from 63.1% in 1989 to 48.1% in 2022. The trend is driven by factors such as economic pressures, HIV/AIDs, conflicts, emphasis on individualism, and undue influence of social media.
Family instability, coupled with the decline in marriage rates, undermines the country’s productivity and long-term development by harming human capital development. Family breakup is often associated with reduced household income, loss of economies of scale, and increased financial strain. This hinders economic productivity by harming innovation and investment. Additionally, economic strain within broken or dysfunctional families can lead to negative parenting, child neglect, increased child behavior problems, and reduced investments in education and health, which impairs the child’s future economic contributions.
Inequality in education and health
Inequality is a significant issue in Kenya’s education and health sectors. A survey by the US Agency for International Development indicated that 8.5% of school-aged children (aged 6 to 15) in the country were out of school. Most of these children are from low-income households and communities. Education outcomes are much lower for low-income populations and in rural areas. Learners who attend rural public schools receive a lower quality of education compared to those in private schools due to issues such as poor infrastructure and a lack of qualified teachers. Education inequality hinders talent discovery, innovation, and production, leading to issues such as high unemployment and income inequality.
Health inequality is another obstacle to economic development. The majority of low-income and rural households cannot afford fees for better health care or preventive services. Increased health burden among low-income households translates to increased government spending and increased productivity.
Poor Governance and Corruption
Poor governance and corruption are rampant in public offices and parastatals. The loss of KSh2 billion daily to corruption is catastrophic. Corruption hinders development by cutting the government’s spending on key sectors like infrastructure, education, and health. Corrupt individuals accumulate wealth without engaging in productive activities, leading to widespread unemployment.
Kenya ranks 121 out of 180 countries on the Corruption Perceptions Index 2025 by Transparency International. To develop effectively, Kenya must first tackle corruption decisively.
Low innovation and productivity
Kenya ranked 102nd out of 138 countries in the Global Innovation Index 2025. Local firms and SMEs struggle with low levels of innovation and low or fluctuating productivity due to a shortage of talent and expertise. The low levels of innovation contribute to a strong dependence on imports of manufactured goods and technology, hindering economic growth and self-sufficiency.
Gambling
The ease of access to mobile betting has led to a rise in gambling addiction, particularly among the youth. A 2024 FinAccess Household Survey by the Kenya National Bureau of Statistics revealed that 14.3% aged 18 to 25 and 15.2% of those aged 26 to 35 were actively involved in betting.
Gambling negatively impacts the country’s economic performance by deterring young people from productive activities. Also, gambling contributes to low productivity by causing absenteeism, reduced performance, and mental health issues. The social effects of gambling come with a heavy price tag for the government.
Overeliance on agriculture
Kenya heavily depends on rain-fed agriculture. While the agriculture sector is crucial for Kenya’s economy and job creation, it is vulnerable to unpredictable weather patterns and climate change. Limited infrastructure and a lack of modern farming techniques also limit its potential, thereby worsening food security and inflation.
Policy Recommendations
Promote marriage and strengthen family stability: Families impact macroeconomics by influencing aggregate savings, consumption, labor supply, and human capital accumulation, affecting economic growth and short-term fluctuations. The government, in collaboration with private stakeholders, must promote marriage and strengthen family units.
Develop an equitable education system: The government must ensure equity of access and quality in the education system. Every student, regardless of their background, should have a fair chance to receive high-quality learning experiences and resources to achieve their full potential. Significant investment is needed to build and modernize infrastructure in public schools. Educational equality enhances economic performance by promoting talent discovery, creating a more productive workforce, driving innovation, and enhancing social mobility.
Ban gambling: The government should ban gambling in Kenya. This ensures money deposited in gambling sites finds its way into the economy. A complete ban on gambling will allow more young people to invest in the real economy and generate real wealth.
Promote innovation: Governments can promote innovation through tax incentives, research and development grants, and partnerships between industry and academia. Increased investment in human development is crucial.
Enhance climate resilience: Strengthen disaster preparedness and adopt policies that promote climate-smart agriculture and a green economy.
Read More: The Gambling Epidemic: How Kenya is Bleeding Trillions, Time to Act
