Kenya's economic recovery needs continuity, not reckless political experimentation

To maintain fiscal health, the World Bank and International Monetary Fund generally regard a debt-service burden of 15-20 per cent of total government revenue as a prudent upper range. By the time the Kenya Kwanza (KK) administration took over from Jubilee, however, debt service was consuming roughly three times that level.

Kenya was, at the time, among six African countries widely regarded as being at serious risk of sovereign default. Anecdotal accounts suggest that senior figures in the outgoing Jubilee administration were themselves conscious of the precarious fiscal and economic position they were leaving behind and expected the situation to deteriorate into outright crisis within months.

Against that backdrop, it is difficult not to regard KK’s avoidance of a catastrophic collapse as a significant achievement. More importantly, the administration appears to have moved beyond crisis management towards a tentative, if still uneven, recovery. Even some of its most trenchant critics now concede that, judged by a range of indicators of financial stability and economic activity, Kenya is travelling along a slow and difficult road to recovery.

One such critic recently highlighted several indicators on social media. First, private sector credit growth reached 10.2 per cent in July 2026, reversing the contraction recorded in 2025. Second, the banking industry reported that the ratio on non-performing loans had fallen to 14.6 per cent in July 2026 from a peak of 17.9 per cent in August 2025.

Third, revenue collection has strengthened, registering a 14 per cent increase in July 2026. Fourth, the first-half results for 2026 showed many companies listed on the Nairobi Securities Exchange delivering notably strong performances. The NSE 20 Share Index stood at 4,482, a substantial increase from its level of 1,466 in November 2023.

Other indicators point in the same direction. The Kenyan shilling has remained relatively stable, trading in a narrow range around Sh129 to the dollar since June 2024. Foreign-exchange reserves stood at USD 14.9 billion in August 2026, equivalent to 6.2 months of import cover; 2.2 months above the statutory minimum. That represents a considerable improvement from the USD 7.5 billion recorded in September 2023.

The Stanbic Bank Purchasing Managers’ Index (PMI), meanwhile, rose to 51.3 in July 2026 from 46.8 a year earlier. A reading above 50 generally indicates expansion in private-sector activity. The improvement therefore suggests a revival in demand for goods and services, alongside stronger manufacturing activity and employment prospects.

None of these amounts to an economic triumph. Kenya’s fiscal position remains constrained, its debt burden substantial and the cost of adjustment politically and socially painful. But the distinction between a country heading towards default and one slowly rebuilding its financial buffers matters. The evidence strongly suggests that Kenya has made that transition.

Which is why, with less than a year to the general election, voters should be more discerning about who they elect president in August 2027. Many of those presenting themselves as alternative leaders have yet to demonstrate a serious grasp of the country’s finances or the demands of governing. Too often, they have relied on slogans that stir popular sentiment rather than credible prescriptions for Kenya’s persistent problems. The choice is stark: Reversing fragile fiscal stabilisation through youthful exuberance or preserving continuity and turning it into durable broad-based economic growth.

Mr Khafafa, public policy analyst