2017 Index of Economic Freedom

Kenya

overall score53.5
world rank135
Rule of Law

Property Rights45.1

Government Integrity24.7

Judicial Effectiveness42.7

Government Size

Government Spending77.9

Tax Burden78.5

Fiscal Health14.4

Regulatory Efficiency

Business Freedom50.0

Labor Freedom62.4

Monetary Freedom73.8

Open Markets

Trade Freedom67.2

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 44.1 million
  • GDP (PPP):
    • $141.9 billion
    • 5.6% growth
    • 5.5% 5-year compound annual growth
    • $3,208 per capita
  • Unemployment:
    • 9.2%
  • Inflation (CPI):
    • 6.6%
  • FDI Inflow:
    • $1.4 billion
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Kenya’s economy has shown moderate resilience in the face of external and internal challenges, and reform efforts are continuing in several areas. The government has enacted laws to improve the business environment, and the overall regulatory framework for launching a business has become more streamlined.

Kenya continues to lag in maintaining an effective rule of law. Overall economic freedom is limited by weak protection of property rights and by extensive corruption. Corruption is perceived as pervasive, and the judicial system remains vulnerable to political influence. Public-sector employees’ continuing demands for pay increases have added fiscal pressures to the budget.

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Background

In 2013, Uhuru Kenyatta won the first presidential election under a constitution promulgated in 2010. In 2014 and 2016, the International Criminal Court dropped charges against Kenyatta and Deputy President William Ruto involving crimes against humanity stemming from post-election violence in 2007. Kenya invaded Somalia in 2011 to counter the Islamist group al-Shabaab and in 2012 joined the African Union coalition battling the terrorist organization there. Since the invasion, Kenya has suffered a surge of terrorist attacks. The country recently discovered about a billion barrels of oil reserves that can be extracted profitably. Plans for a Uganda-to-Kenya oil pipeline fell through in April 2016, leading Kenya to sign a pipeline agreement with Ethiopia.

Rule of LawView Methodology

Property Rights 45.1 Create a Graph using this measurement

Government Integrity 24.7 Create a Graph using this measurement

Judicial Effectiveness 42.7 Create a Graph using this measurement

More than 10 percent of the land in Kenya lacks clear title, although electronic document management at the land registry has been improved. The judiciary demonstrates independence and impartiality, but courts are undermined by weak capacity and resource constraints. Corruption is pervasive and entrenched, and Kenya is ranked among the world’s most corrupt countries by Transparency International.

Government SizeView Methodology

The top income and corporate tax rates are 30 percent. Other taxes include a value-added tax and a tax on interest. The overall tax burden equals 18.7 percent of total domestic income. Government spending has amounted to 27.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 7.2 percent of GDP. Public debt is equivalent to 52.7 percent of GDP.

Regulatory EfficiencyView Methodology

The entrepreneurial environment has become more streamlined, and no minimum capital is required for launching a business. The nonsalary cost of employing a worker is relatively low, but dismissing an employee can be costly. The government continues to regulate prices through subsidies, agricultural marketing boards, and state-owned enterprises. Aid from international donors is funding development of geothermal power.

Open MarketsView Methodology

Trade is moderately important to Kenya’s economy; the value of exports and imports taken together equals 45 percent of GDP. The average applied tariff rate is 8.9 percent. Foreign ownership in some sectors is restricted, and state-owned enterprises distort the economy. The growing financial sector has become more open to competition, and its overall stability is relatively well maintained. Over 40 commercial banks are in operation.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Mauritius74.70.0
2Botswana70.1-1.0
3Rwanda67.64.5
4Côte d'Ivoire 633.0
5Namibia62.50.6
6South Africa62.30.4
7Seychelles61.8-0.4
8Swaziland61.11.4
9Uganda60.91.6
10Burkina Faso59.60.5
11Benin59.2-0.1
12Mali58.62.1
13Gabon58.6-0.4
14Tanzania58.60.1
15Madagascar57.4-3.7
16Nigeria57.1-0.4
17Cabo Verde56.9-9.6
18Democratic Republic of Congo56.410.0
19Ghana56.2-6.8
20Guinea-Bissau56.14.3
21Senegal55.9-2.2
22Comoros55.83.4
23Zambia55.8-3.0
24São Tomé and Príncipe 55.4-1.3
25Mauritania54.4-0.4
26Lesotho53.93.3
27Kenya53.5-4.0
28The Gambia53.4-3.7
29Togo53.2-0.4
30Burundi53.2-0.7
31Ethiopia52.71.2
32Sierra Leone52.60.3
33Malawi52.20.4
34Cameroon51.8-2.4
35Central African Republic51.86.6
36Niger50.8-3.5
37Mozambique 49.9-3.3
38Liberia49.1-3.1
39Chad492.7
40Sudan48.8N/A
41Angola48.5-0.4
42Guinea47.6-5.7
43Djibouti46.7-9.3
44Equatorial Guinea451.3
45Zimbabwe445.8
46Eritrea42.2-0.5
47Republic of Congo 40-2.8
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