Kenya’s Foreign Investment Jumps 170% to a Record $2.74 Billion, but the World Bank Says Corruption Caps Growth

Foreign direct investment into Kenya rose 170.5% to a record $2.74 billion (about 354 billion shillings) in the 12 months to September 2026, according to the World Bank’s 34th Kenya Economic Update, launched in Nairobi on Nov. 4 and reported in detail by The Star on Nov. 7. The surge in Kenya foreign direct investment came as growth picked up to 5.2% in the first half of 2026. The same report warns that corruption is holding the economy well below its potential.

“Kenya’s resilience gives it a strong foundation, but resilience alone will not deliver the growth and jobs Kenyans need. Better governance is an economic imperative,” said Qimiao Fan, the World Bank’s division director for Kenya, Rwanda, Somalia and Uganda.

Where the money and growth came from

The World Bank credited sustained investor confidence. Portfolio inflows also rose 54.6% over the same period, “driven mainly by stronger non-resident investment in government and corporate bonds, as well as state privatisation proceeds,” the bank said, according to The Star. Those inflows helped cushion Kenya against higher fuel import costs and shipping disruption linked to the Middle East conflict.

Industry and services carried growth while agriculture slowed. Construction grew 6.3% in the first half, industry 4.9% and manufacturing 3.3%. Accommodation and restaurants expanded 11.1%, and information and communication 6.1%. Private-sector credit growth more than doubled to 10.6% in September from 5% a year earlier. The Nairobi Securities Exchange reached a record market value of 4.17 trillion shillings, up from 2.68 trillion a year earlier, helped by the partial privatization and listing of Kenya Pipeline Company.

Official figures do not fully line up. Treasury Principal Secretary Chris Kiptoo said at the launch that FDI had doubled to $3.2 billion, Khusoko reported; the World Bank report gives the $2.74 billion figure used here.

By the numbers: growth is strong, but slowing ahead

The 5.2% first-half pace is the fastest in the series since 2023’s 5.7%, and 0.6 percentage points above full-year 2025, by The Boston Report’s calculation. But the bank expects it to fade: full-year 2026 growth is projected at 4.6%, then 4.4% in 2027 and 4.8% in 2028 without ambitious reforms. A year ago, the bank projected 4.9% for 2026, Khusoko noted, so this year’s forecast is 0.3 points lower.

The record FDI is also small relative to the fiscal gap. The deficit reached 6.8% of GDP in the 2025-26 fiscal year, against a 4.7% target, a 2.1-point overshoot. Public debt stood at 69.9% of GDP in June and 72.3% in August, and interest payments absorb about a third of government revenue (33.6%, per Khusoko’s reading of the report). Headline inflation rose to 7.3% in October from 4.6% a year earlier, driven by energy (up 10.4%) and food (up 10.2%), just inside the central bank’s 2.5% to 7.5% target range. Reserves were about $14.7 billion, or 5.9 months of import cover.

The corruption drag

The report’s special focus names corruption as the key binding constraint. In 2025, 39% of firms called corruption a major or severe obstacle, up from 25% in 2013, and 36% had faced at least one bribe request in the prior year. Firms exposed to bribery were more than 30% less likely to innovate. Bribe demands from traffic police and municipal inspectors can take up to 20% of informal workers’ daily earnings, and 83.8% of jobs remain informal.

The bank estimates corruption and collusion add up to 2 percentage points of GDP to annual deficits. In model scenarios, not forecasts, moderate anti-corruption reforms could raise GDP 8.7% by 2035 compared with no reform, and stronger measures 22.3%, supporting more and better jobs for up to 7.7 million people. It urged full electronic procurement, tighter oversight of state-owned enterprises and enforcement of conflict-of-interest rules.

The governance findings follow the bank’s estimate that Kenya overspent about $900 million on the Chinese-built Nairobi-Mombasa railway. For more on African economies and institutions, see our world news coverage and business and finance news.

What to watch

The risks the bank flagged are external as well as domestic: fuel and shipping costs tied to the Middle East conflict, weather shocks and as many as 1.0 million to 2.4 million more Kenyans who could fall below the international poverty line in 2026 because of higher fuel prices. Whether record inflows last will depend on whether the government acts on governance, the report argues, rather than on one strong year of capital flows.

Sources

• World Bank: Kenya's Economy Is Resilient, but Stronger Governance Could Unlock Gains (Nov. 4, 2026)
• The Star (Kenya): Kenya attracts Sh354B in foreign investment as investor confidence rebounds (Nov. 7, 2026)
• Khusoko: Kenya Informal Jobs Hold at 83.8% Despite Growth (Nov. 4, 2026)