Index trend
Previous Quarterly Editions
Expropriation risk: 54 54 54 54 ► Political violence risk:60 60 60 60 ►Terrorism risk:70 70 70 70 ►Exchange transfer and trade sanction risk: 63 63 63 64 ►Sovereign default risk:74 74 74 74 ►
Overall Risk Temperature: 67 (Medium high) TREND ►
Special topic: Political polarization
Political polarization has historically been a major driver of instability in Kenya, driven mainly by a winner-takes-all political system rooted in exclusionary ethnic claims by political leaders.
Distrust between different ethnic groups has been entrenched by a combination of negative campaigning against leaders of rival ethnic communities, and ethnically constituted political violence in the 1990s and again in 2007 and 2008 — when over 1,000 people were killed and 600,000 displaced in post-election violence. This distrust included the rejection of the right of some political leaders to rule on the basis of their identity — such as Kikuyu rejection of Raila Odinga on the basis that he was a Luo and hence uncircumcised. It also includes the rejection of the right of some communities to exercise their political rights — such as the rejection of the rights of minority groups perceived to be immigrants or settlers on the land of other communities, who have at times been forcibly displaced around elections.
While affective polarization has been high, ideological polarization has remained low, and elites have oscillated between more hostile and more cordial relations.
The effect of this backdrop has been a cyclical process of polarization and reconciliation. During moments of political crisis, elite figures generally come together to protect the political system and their privileged position within it, bringing episodes of instability to an end and curtailing the threat of wider civil conflict. At a later point, however, this new elite alliance or consensus is undermined by a further controversy, such as a disputed election, encouraging different leaders to try to mobilize their supporters in a more aggressive way, triggering another episode of polarization. Put another way, elite polarization, and ethnic polarization in general, wax and wane over time. A classic example is the 2022 elections and their aftermath. Following the polls, Raila Odinga claimed he had been cheated by the electoral commission favoring the winning candidate, William Ruto. This led to protests, political unrest and instability, until Ruto agreed to make space for Odinga in government — recently signing a formal power-sharing agreement — effectively co-opting his rival and the main opposition party by offering them access to state positions and resources. In turn, this made reduced tensions between Ruto’s and Odinga’s communities, and made it much easier for the president to govern the country.
Ideological polarization has historically been low because Kenyan political leaders have not generally sought to mobilize support on the basis on programmatic policy positions or class politics. Given that there is broad agreement that the main focus of the government should be to provide development, elections largely revolve around the question of who is best placed to do this and which leaders citizens trust to best look after their interests. Political competition has therefore traditionally revolved around issues of competence and ethnic loyalty as opposed to ideology.
This situation has been changing over the past decade, however. Rapid urbanization, along with higher levels of education and greater access to a wide range of information, appears to have given rise to new forms of collective identity, especially among young people in towns and cities. The protests against the government’s proposed Finance Bill in 2024, for example, were explicitly framed as a non-ethnic protest by individuals who stressed their Kenyan citizenship and demanded less corrupt, more competent and less 'ethnic' governance. If this trend continues, it is likely to result in an increase in ideological polarization and a decline in affective polarization.
TREND ►
There is limited expropriation risk in Kenya. The Ruto government remains committed to working with the International Monetary Fund (IMF), despite growing economic difficulties. The political alliance between Ruto and Odinga is also unlikely to cause any major threats where expropriation risk is concerned, in part because Odinga is very much a junior partner in the coalition and in part because, for all of his populist rhetoric, Odinga has not put forward concrete plans to nationalize industry. However, as the 2026 election draw near, Ruto will come under greater pressure to deflect blame for the economic hardship suffered by many Kenyans and could scapegoat international companies and financial institutions. Although economic growth is expected to rise to 4.7% in 2025, up from 3.1% in 2024, the benefits of this have yet to be recognized by Kenyan voters.
Rising government fees and taxes triggered a youth-led protest movement against the Finance Bill 2024. The government response was violent repression, both in terms of the treatment of protestors during the demonstrations and the extra-legal abductions and attacks on critical voices in the months that followed. Popular opposition to Ruto’s government remains considerable but at present is cowed by fear of retribution. Recognizing his falling popularity, Ruto responded to the protests by forming a ‘broad-based government’ with prominent opposition leaders such as Odinga. As part of that pact, Ruto pledged to support Odinga’s campaign to become the chair of the African Union Commission. When that attempt ended in defeat, many commentators feared that the alliance between Ruto and Odinga would unravel, leading to fresh political instability. Instead, the two leaders signed a formal power-sharing agreement that appears to be intended to set the scene for an electoral alliance for the 2026 polls. The agreement included a number of valuable measures, such as efforts to reduce spiraling corruption, but there is no clear enforcement mechanism. Moreover, there is a risk that the sight of the country’s main opposition leader actively shoring up the support base of a deeply unpopular government could encourage Kenyan citizens to lose faith in the formal political system, making violent demonstrations more likely in the future.
Terrorism attacks committed by the Al-Shabaab group have continued but have been largely restricted to Garissa, Mandera and Lamu counties, with no major attacks on Nairobi or the country’s key economic centers. A successful attack on Nairobi remains a significant risk, however. In January 2025, an international counterterrorism operation arrested 37 suspects and seized small arms and heavy weapons. The 17 arrests made in Kenya alone included two suspected Islamic State members and others involved in financing terrorism. The insecurity around the Kenya–Somalia border has significant implications for trade and for the completion of infrastructure projects necessary to promote regional growth.
As inflation has come under control, the government has moved to reduce interest rates, from a recent high of 13% in June 2024 to 11.25% by the end of 2024 and down to 10.75% in February 2025. This has been made possible by a significant decline in the level of inflation, which has fallen from around 6% to under 4%. Significantly, there has been a large fall in the cost of fuel, sugar and maize flour, easing the economic difficulties faced by many Kenyan citizens. The central bank is expected to keep interest rates close to 10% while inflation remains below the 5% midpoint of its target.
Kenya’s debt situation remains perilous. By the end of 2024, the country’s public debt had increased to over 11 trillion Kenyan shillings (over $83 billion), breaching the ceiling of 10 trillion Kenyan shillings set by the Treasury. It is estimated that Kenya will need to spend around $5 billion per year for the next five years to meet its debt obligations and that the only way to achieve this will be to increase taxes and reduce government expenditure.
Although the appreciation of the Kenyan shilling has prevented an increase in the debt-to-GDP ratio, there is a concern about the high cost of some of the new loans the government has taken on in order to be able to service old debt and make salary payments to public sector workers. Most notably, a $1.5 billion private bond provided by the United Arab Emirates, finalized in February 2025, has an 8.25% interest rate, although repayments do not begin until 2032. Under pressure to increase government spending ahead of the 2026 general elections, Ruto’s ability to increase fees and taxes is constrained by public opinion and in some cases the courts, meaning that a debt crisis remains a serious risk.
