2018 Index of Economic Freedom

Kenya

overall score54.7
world rank129
Rule of Law

Property Rights47.9

Government Integrity27.5

Judicial Effectiveness44.0

Government Size

Government Spending77.5

Tax Burden78.5

Fiscal Health14.1

Regulatory Efficiency

Business Freedom55.5

Labor Freedom62.9

Monetary Freedom74.0

Open Markets

Trade Freedom69.8

Investment Freedom55.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 45.5 million
  • GDP (PPP):
    • $152.8 billion
    • 5.6% growth
    • 5.4% 5-year compound annual growth
    • $3,361 per capita
  • Unemployment:
    • 11.0%
  • Inflation (CPI):
    • 6.3%
  • FDI Inflow:
    • $394.0 million
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Kenya’s economic freedom score is 54.7, making its economy the 129th freest in the 2018 Index. Its overall score has increased by 1.2 points, with improvements in business freedom and property rights offsetting declines in the government spending and fiscal health indicators. Kenya is ranked 22nd among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.

Kenya’s protracted electoral stalemate has exposed deep political and ethnic divisions. The country has a growing entrepreneurial middle class and has enjoyed steady growth, but its economic and development trajectory is impaired by weak governance, ineffective rule of law, and corruption. The government has successfully courted foreign direct investment for infrastructure development and is promoting regional trade liberalization. A new government system created in 2013 has gradually devolved state revenues and responsibilities to 47 counties.

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Background

The International Criminal Court charged Uhuru Kenyatta, son of Kenya’s first president, with crimes against humanity during post-election violence in 2007, but charges were later withdrawn. In 2013, Uhuru Kenyatta won the first presidential election conducted under a 2010 constitution that added checks and balances to executive power. Kenyatta was declared the winner of the high-turnout August 2017 presidential election, but the Supreme Court annulled it and upheld main opposition challenger Raila Odinga’s claim of irregularities. Kenyatta then won an October 2017 revote in an election marred by low turnout and lack of a clear mandate. Kenya is the economic, financial, and transport hub of East Africa, and its real GDP growth has been robust in recent years.

Rule of LawView Methodology

Property Rights 47.9 Create a Graph using this measurement

Government Integrity 27.5 Create a Graph using this measurement

Judicial Effectiveness 44.0 Create a Graph using this measurement

The legal infrastructure around land ownership and registration has changed in recent years, and the state has new powers to confiscate land that it determines has not been used productively. The judiciary demonstrates independence and impartiality, but courts are undermined by weak institutional capacity. Corruption is pervasive and entrenched, although some progress has been made in fighting it.

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. Over the past three years, government spending has amounted to 27.4 percent of total output (GDP), and budget deficits have averaged 7.6 percent of GDP. Public debt is equivalent to 54.4 percent of GDP.

Regulatory EfficiencyView Methodology

In 2016, Kenya simplified the process for starting a business but also made it more expensive. Getting electricity, registering property, minority investor protections, and resolution of insolvency were improved. The government is the largest formal-sector employer. Illegal child labor remains a problem. The government continues to regulate prices through subsidies on corn, milk, sugar, and other staples and through state-owned enterprises.

Open MarketsView Methodology

Trade is moderately important to Kenya’s economy; the combined value of exports and imports equals 38 percent of GDP. The average applied tariff rate is 7.6 percent. Nontariff barriers impede trade. Government openness to foreign investment is below average. The financial sector remains relatively stable. Nonperforming loans, particularly from state-owned banks to state-owned enterprises, have been declining. Capital markets are relatively small.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Mauritius75.10.4
2Botswana69.9-0.2
3Rwanda69.11.5
4South Africa630.7
5Uganda621.1
6Côte d'Ivoire 62-1.0
7Seychelles61.6-0.2
8Burkina Faso600.4
9Cabo Verde603.1
10Tanzania59.91.3
11Namibia58.5-4.0
12Nigeria58.51.4
13Gabon58-0.6
14Mali57.6-1.0
15Guinea-Bissau56.90.8
16Madagascar56.8-0.6
17Benin56.7-2.5
18Comoros56.20.4
19Ghana56-0.2
20Swaziland55.9-5.2
21Senegal55.7-0.2
22Kenya54.71.2
23Zambia54.3-1.5
24Mauritania54-0.4
25Lesotho53.90.0
26São Tomé and Príncipe 53.6-1.8
27Ethiopia52.80.1
28The Gambia52.3-1.1
29Guinea52.24.6
30Democratic Republic of Congo52.1-4.3
31Malawi52-0.2
32Cameroon51.90.1
33Sierra Leone51.8-0.8
34Burundi50.9-2.3
35Liberia50.91.8
36Niger49.5-1.3
37Sudan49.40.6
38Chad49.30.3
39Central African Republic49.2-2.6
40Angola48.60.1
41Togo47.8-5.4
42Mozambique 46.3-3.6
43Djibouti45.1-1.6
44Zimbabwe440.0
45Equatorial Guinea42-3.0
46Eritrea41.7-0.5
47Republic of Congo 38.9-1.1
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