Kenya’s Near-Term Economic Outlook & Implications for Credit Creation

Executive summary

Kenya’s growth moderated from 2023 highs; 2024 growth was around 4.7% and 2025 forecasts vary. Improvements in reserves, diaspora flows and recent sovereign funding actions have eased some external liquidity risks, prompting positive rating outlooks from rating agencies. However, heavy domestic borrowing and elevated interest costs continue to crowd out private credit and limit near-term recovery. Key risks are fiscal consolidation progress and private-sector credit recovery. 

Context & recent developments:

Growth & data

The Kenya National Bureau of Statistics (KNBS) reports 4.7% growth in 2024 with mixed sectoral performance; Q1/Q4 data show uneven recovery. 

Monetary policy

CBK has been easing the CBR through 2025 (multiple cuts), responding to easing inflation pressures and liquidity improvements. 

Credit & debt

Domestic borrowing remains high, keeping effective borrowing costs elevated and constraining private credit growth; rating agencies have recently signalled improving outlooks on liquidity and reserves. 

Key implications:

For banks & lenders

Pressure on net interest margins persists; expect continued focus on liability management, selective lending, and higher underwriting standards. 

For corporates & SMEs

Credit access likely to remain tight until private-sector credit rebounds; refinancing terms may improve gradually if fiscal consolidation and external financing progress. 

For investors

Sovereign risk premium compression is possible if reforms and reserve buildups continue; however fiscal slippage would reverse sentiment quickly. 

Drivers to watch that will determine whether growth re-accelerates and borrowing costs sustainably decline:

1. Ongoing Government of Kenya divestures in Q1 ‘26 (Safaricom, Kenya Pipeline)

2. Progress on external financing (IMF/programs),

3. Domestic revenue performance,

4. Export/remittance trends, and the pace of credit recovery,

5. Increased raid on payslips (Statutory contributions adjusted from Feb. 2026)

Actionable recommendations:

Policymakers

Prioritise credible fiscal consolidation measures and use reserves to smooth shocks; accelerate reforms tied to pledged external financing.

Lenders

Strengthen stress testing for interest-rate and liquidity scenarios; offer tailored credit products for economic bedrock sectors (retail/chech-off, agribusiness, diaspora-linked services).

Borrowers

De-risk balance sheets, extend maturities where possible, and lock in hedges for FX exposures.

Sources & further reading:

KNBS Economic Survey 2025;

CBK MPC statements and weekly bulletins;

Moody’s 2026 outlook;

S&P rating action and analysis;

WEF Global Risks Report .