The Kenyan business environment continues to recover from the impact of COVID-19 and global economic slowdown, but challenges remain. These include:

• Tight fiscal and budget conditions
• Elevated cost of living, depreciating currency, and declining foreign exchange reserves  
• Declining agricultural productivity caused by recurrent drought and shifts in land use
• Corruption and weak governance
• Weakened consumer spending
• Depressed public sector investment

According to Transparency International’s 2022 Global Corruption Perception Index, Kenya ranked 123 out of 180 countries (with 180 being the most corrupt). Claims of corrupt dealings, particularly in land transactions and large government contracts persist. Other governance issues also include government inefficiency, and weak regulatory and judicial systems.

Kenya’s public sector spending has been adversely affected by ballooning public debt. According to the Economist Intelligence Unit (EIU) Country Risk Report, Kenya’s sovereign risk assessment remains at CCC, with a wide budget deficit and the rising cost of servicing external debt poses risks. The Kenya government shifted its fiscal policy from stimulus towards consolidation, backed by an enhanced and extended $3.5 billion IMF program running to 2025. Kenya’s debt-to-GDP ratio rose to 69.8% in 2022 from 68.1% in 2021 (Deloitte), with debt service as a percentage of GDP rising more rapidly. Kenya’s debt pressures led to reported delays in some public sector procurements. 

According to the EIU’s Kenya political risk  assessment, as of August 2023, Kenya’s political risk rating remains at CC level, with a score of 71 (high risk).  In 2022, Kenya held peaceful and transparent national elections and experienced a smooth and orderly transfer of power.  However, discontent over cost-of-living pressures and social inequalities remain potential threats to political stability.

Kenya’s intellectual property rights (IPR) enforcement has improved gradually over recent years, but some U.S. firms remain reluctant to export to Kenya goods and services dependent on a strong IPR regime. According to the EIU, competition from low-cost Chinese imports and the prevalence of counterfeit and substandard goods are further barriers, especially in manufacturing.