Report: Kenya loses Sh403 billion annually to illicit financial flows

Kenya loses an estimated Sh403.58 billion annually through corruption, trade mis-invoicing and illicit goods, according to a new report by Amnesty International.

The losses are equivalent to about 12 per cent of the national budget and exceed allocations for health and social protection, the report says.

The findings come as Kenyans contend with higher taxes, rising living costs and growing public debt, raising questions about whether the government is doing enough to seal revenue loopholes before demanding more from citizens.

The report, titled Human Rights Under Siege: Authoritarian Practices and Economic Pressures Amid Youth-Led Protests in Kenya, argues that illicit financial flows undermine domestic revenue collection and worsen the country’s fiscal challenges.

Citing a 2025 report by Oxfam and the National Taxpayers Association, Amnesty says illicit financial flows force the government to rely on external borrowing to compensate for lost revenue, further increasing the country’s debt burden.

“This results in the government increasing taxes as the country struggles to repay the debt, creating a vicious cycle of increasing debt and taxation. Both the ICESCR and the African Charter on Human and Peoples’ Rights obligate Kenya to guarantee social and economic rights even during situations of economic scarcity,” Amnesty says.

“By failing to reprioritize public expenditure and therefore underfunding health and social services the Kenyan government has failed to fulfil its obligations.”

According to the report, tax evasion remains widespread. Global Financial Integrity estimates that Kenya lost approximately Sh117.7 billion (USD 907 million) to tax evasion in 2018. The figure rose to about Sh181.7 billion (USD1.4 billion) in 2025, the report says.

“The losses occasioned by IFFs equate to about 12 per cent of the national budget, surpassing both the health and social protection budgets,” Amnesty says.

“By not addressing Illicit Financial Flows, the resultant loss of revenue that could otherwise be used in funding the realization of human rights, Kenya is in violation of its domestic and international obligations,” the organisation adds.

Illicit financial flows involve money that is illegally earned, transferred or moved across borders. They include proceeds of corruption, tax evasion and the manipulation of trade transactions to evade taxes or move money out of the country.

Trade mis-invoicing, for example, occurs when the value or quantity of goods is deliberately misstated in import or export documents, potentially allowing traders to evade taxes or move money illegally.

Amnesty argues that revenue lost through such activities weakens the government’s capacity to finance essential services, potentially increasing pressure to borrow or introduce additional taxes.

The report links these revenue losses to the government’s growing debt obligations, arguing that the combination leaves less money available for healthcare, education and social protection.

“We see debt crisis where we prioritize debt repayment over human rights and this is especially because parliament is a lapdog for the executive,” reads the report.

“And until parliament plays its role properly and becomes the ultimate holder of the Kenyan path, we will be far from realizing our reality.”

The report also notes that Kenya will spend nearly four out of every five shillings collected in ordinary revenue on debt repayments in the 2026/27 financial year, leaving less money for essential public services as households grapple with the rising cost of living.

Debt servicing accounted for 68.7 per cent of the national budget in 2025/26, compared with 6.7 per cent for health, 18.7 per cent for education and 3.6 per cent for social protection and poverty reduction, according to the report.

National Treasury projections show debt service rising to Sh2.301 trillion in 2026/27, equivalent to 79.8 per cent of ordinary revenue, from Sh1.875 trillion, or 72.4 per cent, in the previous financial year.

“This in turn drives the government to reduce social spending and increase taxes, which led to the protests in 2023 and 2024,” Amnesty says, citing public finance regulations that give debt obligations priority over other expenditure commitments.

Kenya’s public and publicly guaranteed debt stood at Sh11.814 trillion at the end of June 2025, equivalent to 67.8 per cent of gross domestic product, according to the Treasury’s 2026 Medium-Term Debt Management Strategy.

Domestic borrowing accounted for Sh6.326 trillion, while external debt stood at Sh5.488 trillion.

The Treasury’s Public Debt Management Office subsequently put the debt stock at approximately Sh12.32 trillion in March 2026.

Amnesty links the country’s growing debt burden and taxation policies to economic hardship, arguing that fiscal choices have constrained spending on health, education and social protection, contributing to the discontent behind youth-led protests.