Kenya Can Build on Past Success to Make Growth More Inclusive and Accelerate Poverty Reduction

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Kenya has in the past been successful in translating economic growth into improved living standards of its citizens. Despite progress, the challenge going forward is to ensure the poor and vulnerable benefit equally from progress, addressing the stark and persistent disparities across space and income groups.

According to a new World Bank report titled Kenya Poverty and Equity Assessment (KPEA) 2023 – From Poverty to Prosperity: Making Growth More Inclusive, which covers the period between 2005 and 2021, the progress Kenya has made in reducing poverty and raising living standards of its citizens has not been equally shared. As a result, economic growth has not sufficiently translated to more people escaping poverty and in recent years, poverty has become less responsive to economic growth.

“While Kenya's economic growth is commendable, it is important to ensure that it is inclusive and benefits everyone, especially the poor and vulnerable,” said Keith Hansen, World Bank Country Director for Kenya. “An inclusive growth strategy will accelerate poverty reduction and equalize opportunities through smart economic policies and efficient and equitable public spending that raise the productive capacity of the poor.”

A combination of interconnected factors contributes to the uneven progress. Creation of productive jobs and economic opportunities is limited especially for the poor. The incidence of shocks, especially extreme weather shocks, is growing, with exposure and vulnerability highest among the poor. In addition, inequality of both opportunity and outcomes dampens the translation of economy-wide growth to income growth of the poor.

The recent slowdown in the pace of poverty reduction point to the need for an inclusive growth strategy that brings widespread growth in people’s disposable income, says the KPEA. It recommends three broad interconnected policy pathways to inform such a strategy. These include (i) connecting the poor to economic growth (ii) strengthening households’ resilience to adverse weather shocks, and (iii) leveraging fiscal policy to support poverty reduction objectives.

“More disposable income in the hands of more people, especially amongst those who are at the bottom of the income distribution, will create lasting pathways to prosperity. Such widespread prosperity is also good for the economy because it can translate into higher tax revenues and greater fiscal space but also support a vibrant domestic demand and private sector.” said Precious Zikhali, Senior Economist, and co-author of the report.

The KPEA says that Kenya can build on past success to accelerate poverty reduction and boost equity. Connecting the poor to the country’s economic growth calls for a policy focus on raising the working poor’s productivity in agriculture, manufacturing, and services sectors where most are deployed, it adds.

“A broad range of public policy instruments, spanning agricultural policy, Micro, Small and Medium Enterprises policy, and urban development as well as interventions from the private sector will also be needed to raise the poor’s productive capacity,” said Nistha Sinha, Senior Economist, and a co-author of the report.

Distributed by APO Group on behalf of The World Bank Group.