2013 Index of Economic Freedom

Kenya

overall score55.9
world rank114
Rule of Law

Property Rights30.0

Freedom From Corruption22.0

Limited Government

Government Spending73.5

Fiscal Freedom77.5

Regulatory Efficiency

Business Freedom58.0

Labor Freedom57.1

Monetary Freedom73.8

Open Markets

Trade Freedom66.7

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 40.9 million
  • GDP (PPP):
    • $71.4 billion
    • 5.0% growth
    • 4.3% 5-year compound annual growth
    • $1,746 per capita
  • Unemployment:
    • 40.0%
  • Inflation (CPI):
    • 14.0%
  • FDI Inflow:
    • $335.2 million
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Kenya’s economic freedom score is 55.9, making its economy the 114th freest in the 2013 Index. Its score has decreased by 1.6 points since last year due to declines in half of the 10 economic freedoms including labor freedom, monetary freedom, and business freedom. Kenya is ranked 18th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

Poor government policies and weak public administration continue to suppress economic freedom and entrepreneurial activity. In particular, the rule of law remains weak, corruption is widespread, and the judiciary is subject to political influence. Efforts to improve regulatory efficiency and open markets continue but at a slow pace and with little discernible impact.

Measures have been implemented to improve public financial management, and the government continues to offer reforms related to business development and easing the customs process. An overhaul of contract enforcement and remediation is a good step, but much more is needed to foster the institutions necessary for sustained economic growth.

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Background

Widespread violence followed the 2007 election when both Mwai Kibaki, who had won the presidency in 2002, and rival candidate Raila Odinga claimed victory. Months of negotiations resulted in a power-sharing arrangement. A new constitution was adopted in August 2010. In November 2011, Kenya launched a military incursion into southern Somalia in response to alleged terrorist activity and kidnappings. Kenya is the transportation, communication, and financial hub of East Africa. Economic growth, hindered for decades by government mismanagement, weak property rights, and corruption, was improving before the post-election instability in 2007 and has picked up again since 2009. The government employs about one-third of the formal labor force, and civil service reform has been slow. Nearly 80 percent of employment is informal. Agriculture accounts for about a quarter of GDP and employs a majority of the population.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 22.0 Create a Graph using this measurement

The independence of Kenya’s courts is severely compromised, and the judicial system is mired in incompetence, executive interference, and corruption. The process for acquiring land titles is often non-transparent and cumbersome. To root out corruption, the new constitution promulgated in 2010 provides for the devolution of some governing powers to 47 new counties over a three-year period beginning in 2013.

Limited GovernmentView Methodology

The top income and corporate tax rates are 30 percent. Other taxes include a value-added tax (VAT) and a tax on interest. The overall tax burden amounts to 21.3 percent of GDP. Government spending is equivalent to 29.7 percent of total domestic output. The fiscal climate remains steady. The deficit has fallen slightly to 4.1 percent of GDP, and public debt has fallen to 48.9 percent of GDP.

Regulatory EfficiencyView Methodology

With no minimum capital required, the business start-up process takes 10 procedures, but completing licensing requirements takes more than 100 days and costs over twice the level of average annual income. Much of the labor force is employed in the public sector. Wide swings in the inflation rate have hurt monetary stability. The state continues to regulate prices through agricultural marketing boards and state-owned enterprises.

Open MarketsView Methodology

The trade-weighted average tariff rate is quite high at 9.2 percent, and non-tariff barriers including bureaucratic customs procedures further constrain freedom to trade. The investment regime lacks efficiency and transparency. The financial sector remains vulnerable to government influence. The state owns or holds shares in several domestic financial institutions and continues to influence the allocation of credit.

Country's Score Over Time

Bar Graph of Kenya Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Kenya to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.9-0.1
2Botswana70.61.0
3Rwanda64.1-0.8
4Cape Verde63.70.2
5Madagascar62-0.4
6South Africa61.8-0.9
7Ghana61.30.6
8Uganda61.1-0.8
9Namibia60.3-1.6
10Burkina Faso59.9-0.7
11The Gambia58.80.0
12Zambia58.70.4
13Tanzania57.90.9
14Gabon57.81.4
15Benin57.61.9
16Swaziland57.20.0
17Mali56.40.6
18Kenya55.9-1.6
19Senegal55.50.1
20Malawi55.3-1.1
21Nigeria55.1-1.2
22Mozambique 55-2.1
23Seychelles54.91.9
24Côte d'Ivoire 54.1-0.2
25Djibouti53.90.0
26Niger53.9-0.4
27Cameroon52.30.5
28Mauritania52.3-0.7
29Guinea51.20.4
30Guinea-Bissau51.11.0
31Central African Republic50.40.1
32Ethiopia49.4-2.6
33Liberia49.30.7
34Burundi490.9
35Togo48.80.5
36Sierra Leone48.3-0.8
37São Tomé and Príncipe 48-2.2
38Lesotho47.91.3
39Comoros47.51.8
40Angola47.30.6
41Chad45.20.4
42Republic of Congo 43.5-0.3
43Equatorial Guinea42.3-0.5
44Democratic Republic of Congo39.6-1.5
45Eritrea36.30.1
46Zimbabwe28.62.3
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