2014 Index of Economic Freedom

Kenya

overall score57.1
world rank111
Rule of Law

Property Rights30.0

Freedom From Corruption21.0

Limited Government

Government Spending74.6

Fiscal Freedom78.0

Regulatory Efficiency

Business Freedom55.8

Labor Freedom64.0

Monetary Freedom74.9

Open Markets

Trade Freedom72.8

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 42.1 million
  • GDP (PPP):
    • $75.9 billion
    • 4.7% growth
    • 3.8% 5-year compound annual growth
    • $1,802 per capita
  • Unemployment:
    • 40.0%
  • Inflation (CPI):
    • 9.4%
  • FDI Inflow:
    • $258.6 million
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Kenya’s economic freedom score is 57.1, making its economy the 111th freest in the 2014 Index. Its score has increased by 1.2 points since last year, with notable advancements in trade freedom, labor freedom, and monetary freedom outweighing declines in business freedom and freedom from corruption. Kenya is ranked 17th out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average but above the regional average.

Over the 20-year history of the Index, Kenya has advanced its economic freedom score by 2.7 points. Measures have been implemented to improve public financial management, and the government has pursued reforms related to business development and easing the customs process. Score increases have been recorded in six of the 10 economic freedoms, notably monetary freedom, trade freedom, and the management of government spending.

These gains, however, have been largely eroded by significant deterioration in the rule of law as measured by property rights and freedom from corruption. Kenya has been rated a “mostly unfree” economy during most of its history in the Index and was ranked “moderately free” only once, in 1997.

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Background

In March 2013, Uhuru Kenyatta and his running mate William Ruto won the first presidential election under the new constitution, adopted in 2010. Both face charges of crimes against humanity related to violence in the aftermath of the 2007 presidential election. In November 2011, Kenya launched a military incursion into Somalia in response to terrorist activity and kidnappings. In September 2013, it suffered its largest terrorist attack since the 1998 U.S. embassy bombing. Economic growth, hindered for decades by poor government administration, weak property rights, and corruption, picked up in 2009. The government employs one-third of the formal labor force. Agriculture accounts for about 25 percent of GDP and employs a majority of the workforce. In 2012, Kenya launched the $25.5 billion Lamu Port South Sudan Ethiopia Corridor project.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 21.0 Create a Graph using this measurement

Kenya’s 2010 constitution provides for increased accountability and transparency to combat pervasive corruption, but no top officials have been successfully prosecuted for corruption since 2002. The police, the judiciary, and the Ministry of Defense have been identified as some of the country’s most corrupt institutions. Although the judiciary is independent, the courts are understaffed and underfinanced, leading to delays.

Limited GovernmentView Methodology

The top individual 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 is equal to 20.1 percent of gross domestic income. Government spending amounts to 29 percent of the domestic economy. Public debt has edged down to 48 percent of GDP. The new government has focused on capital gains tax enforcement to boost revenue.

Regulatory EfficiencyView Methodology

The business start-up process takes 10 procedures, and no minimum capital is required. However, completing licensing requirements takes more than 100 days and costs about twice the level of average annual income. Much of the labor force is employed in the public sector. The government continues to regulate prices through subsidies, agricultural marketing boards, and state-owned enterprises.

Open MarketsView Methodology

Kenya’s average tariff rate is 6.1 percent. In general, laws do not discriminate against foreign investors, but new investment is screened by the government. The financial sector remains relatively stable. Non-performing loans, particularly from state-owned banks to state-owned enterprises, have been declining. About 20 percent of the adult population has bank accounts and access to formal financial services. Capital markets are relatively small.

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
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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