Public Finance & Economic Development
Kenya Leads Africa in Private Sector Growth
Uganda and Nigeria maintain steady growth amid inflation pressures. Regional PMI trends reflect resilience in East Africa.
Kenya tops Africa in private sector expansion with PMI 55 in Nov 2025, outpacing Nigeria and Uganda as regional economies strengthen.
Kenya recorded the strongest private sector expansion among eight major African economies in November, as business activity accelerated across the region, according to the latest Purchasing Managers’ Index (PMI) surveys published by S&P Global.
The East African economy topped the continental rankings with a headline PMI of 55, overtaking Nigeria, The marked upturn reflects a sharp rise in sales volumes and new customer orders, supported by softer price conditions and a wave of new product launches.
Uganda maintained its position as the region’s second-best performer at 53.8, followed by Nigeria at 53.6 and Zambia at 51.1. Mozambique and Ghana posted readings of 50.8 and 50.1 respectively, signalling marginal improvement.
Egypt’s private sector returned to growth for the first time in nine months, also registering a PMI of 51.1.
South Africa, however, was the only country to remain in contraction, underscoring its continued divergence from an otherwise strengthening regional trend.
A reading above 50 indicates an improvement in private-sector business conditions, while figures below the threshold point to a deterioration. The PMI surveys track trends in output, new orders, employment, suppliers’ delivery times and inventory levels across key industries.
In its latest Africa’s Pulse report, the World Bank notes that sub-Saharan Africa’s recovery is gaining momentum, with regional GDP projected to grow from 3.5% in 2024 to 3.8% in 2025, and to average 4.4% between 2026 and 2027.
Related Story:Kenya’s business activity hits 11-month low on weaker demand, protests
The improved outlook reflects cooling prices pressures across the several economies, supporting broader economic stability in the region.
More on the countries’ business activities
Kenya: Output, new business climb to five-year high
Kenya’s PMI rose to 55.0 in November from 52.5 a month earlier, marking the fastest growth in five years and a firm rebound from protest-related disruptions earlier in the year.
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Firms reported a strong uplift in new orders as improved purchasing power, easing inflation and successful product launches drove demand. Businesses responded by increasing input purchases and hiring at one of the quickest rates since 2023.
“Inflation expectations are anchored,” said Christopher Legilisho of Standard Bank, noting softer increases in input, purchase and output prices, though higher material costs and taxes still squeezed margins.
Improved supplier delivery times supported inventory rebuilding across all monitored sectors. Confidence remained positive but continued to ease for a third month.
Uganda: Firms raise selling prices amid rising inflation
Uganda’s private sector posted another month of solid growth in November, with the PMI edging up to 53.8 from 53.4 in October as stronger new business and output underpinned activity. New orders rose for the tenth straight month and were spread across sectors, though gains were softest in construction.
To meet rising demand, firms increased hiring, ramped up input purchases and expanded inventories. The build-up in stock levels came despite renewed delays in supplier deliveries, which panellists linked to adverse weather conditions.
Inflation remained a key pressure point. Companies reported higher purchasing costs driven by broad-based price increases. “Businesses reported higher input prices in November, reflecting higher utility costs, especially electricity and water, and greater purchased goods prices,” said Legilisho. This prompted firms to lift selling prices to protect margins.
Business confidence for the year ahead held steady, supported by planned investment in advertising and marketing.
Nigeria: PMI expansion holds for 12 straight months
New product launches helped lift customer demand in November, driving another rise in new orders and business activity across Nigeria’s private sector. The country posted a PMI reading of 53.6, signalling solid improvement—only slightly softer than October—and marking 12 consecutive months of expansion.
Conditions were supported by easing inflationary pressures. Headline inflation slowed for a seventh month to 16.02% in October from 18.02%, the softest increase in more than three years. Input cost inflation moderated but remained elevated, while output price growth eased for the sixth time in seven months.
Hiring rose again, though at a slower pace, while firms sharply increased purchasing and inventory levels. Business confidence weakened further, hitting its lowest level since May.
“We still see the Nigerian economy growing by 4.0% in 2025,” said Muyiwa Oni of Stanbic IBTC. “Both manufacturing and services are likely to post stronger growth next year based on PMI trends so far.”
Zambia: Business activity rises slightly as energy shortages bite
Zambia recorded a modest improvement in business conditions in November, with the PMI edging up to 51.3 from 50.8 in October, supported by expansions in new orders, employment and input purchases.
But the upturn remained fragile as persistent energy shortages weighed on output, which fell for a second month, while new business growth eased to a three-month low.“Agriculture was the only monitored sector to see simultaneous growth in output and new orders,” noted Musenge Komeki of Stanbic Bank.
Input costs rose at the fastest pace since May, although firms cut selling prices slightly to support demand, while confidence slipped to a ten-month low.
Egypt: Non-oil private sector exits contraction amid easing costs
Egypt’s non-oil private sector returned to growth in November, with the PMI rising to 51.1 — the first reading above 50 since February.
Output expanded across manufacturing, construction and services, supported by a surge in new business after eight months of decline.
Firms also benefited from slower increases in input and output prices, helping stabilise margins. Employment remained largely unchanged, contributing to a modest rise in outstanding work, while input inventories showed signs of stability.
S&P Global noted the upturn signals a strong end to the year: “Historically speaking, the latest PMI reading signals that year-on-year GDP growth could rise above 5% in the fourth quarter,” David Owen, a senior economist at the agency said.
Despite softening slightly from October, expectations for future activity remained positive, pointing to a generally upbeat outlook for the sector.
Mozambique: Rising orders lift PMI to nine-month high
Mozambique’s private sector expanded at the fastest pace in nine months, with the PMI rising to 50.8 in November, driven by a surge in new orders and higher employment. Backlogs fell for the seventh consecutive month, while firms increased input purchases and improved supplier delivery times.
Cost pressures accelerated, with overall input prices rising due to higher material and wage costs, leading to a modest increase in selling prices.
“The PMI suggests some passthrough from cost increases to higher sales prices. USD/MZN stability should continue to limit inflationary pressures,” said Fáusio Mussá, Chief Economist at Standard Bank Mozambique.
The softer outlook coincides with post-election shocks and risks from a potential Mozal Aluminium shutdown, although LNG projects offer hope of recovery.
Ghana: Output stagnates despite cooling prices, stronger demand
Ghanaian firms saw business conditions remain largely unchanged in November, with the PMI edging slightly down to 50.1 from 50.3 in October, even as new orders rose for the tenth consecutive month.
Companies continued to lower selling prices for the seventh straight month amid easing input costs, yet output remained flat. Employment, input purchases and inventory levels all increased, reflecting firms’ efforts to meet stronger customer demand.
“Companies are yet to see the full benefit of muted price pressures on business activity, but with the Bank of Ghana cutting interest rates again in November, we will hopefully start to see meaningful expansion,” said Andrew Harker, Economics Director at S&P Global Market Intelligence.
Ghana’s headline inflation has been on a downward trajectory since January — a trend that has allowed policymakers to cut interest rates by 1000 points this year.
South Africa: Business confidence hits 12-month high despite softer conditions
South Africa’s private sector contracted further in November, with the PMI slipping to 49.0, marking the fastest decline in eight months.
The softer reading was driven by lower new business and output, while input costs surged, putting pressure on margins. Industry and construction led the downturn, partially offset by steadier activity in services and wholesale & retail. Employment rose modestly, but input purchases remained muted amid subdued demand.
Despite these challenges, firms showed greater confidence for the year ahead, with optimism rising to the highest level in 12 months.
Related Story:Kenya’s business activity nears expansion as confidence hits 30-month high
“After seeing improving business conditions throughout the middle of the year, the recent data may only reflect a modest cooling-off,” said David Owen. “The risk will be whether the uptick in price pressures observed in November is sustained, a factor that could hit business margins and customer demand.”
Public Finance & Economic Development
Kenya Flags Wider Budget Deficit in 2026/27
Kenya projects a 5.3% budget deficit in the 2026/27 fiscal year, citing increased infrastructure and social spending. The government plans to fill the gap through external and domestic borrowing.
Kenya projects a wider 2026/27 budget deficit at 5.3% of GDP, leaning more on external borrowing amid fiscal and debt pressures.
Kenya’s Budget Deficit to Widen to 5.3% of GDP in 2026/27
Nairobi, Kenya — Kenya’s Finance Ministry projects that the budget deficit will widen to 5.3% of GDP in the 2026/27 fiscal year. This is higher than earlier forecasts. Officials say slow revenue growth and sustained spending have caused the gap.
The ministry will rely on domestic borrowing to finance most of the deficit. “We aim to fund the deficit responsibly while protecting the domestic market,” a Treasury statement said.
Revenue Shortfalls and Spending Pressures
The draft 2026/27 Budget Policy Statement shows total revenue at KSh 3.487 trillion, or about 16.7% of GDP. Revenue has underperformed because of slow economic growth, lower tax compliance, and weaker commodity prices.
The government plans total spending of KSh 4.642 trillion. This includes development projects, county transfers, and debt service. The resulting deficit will reach KSh 1.106 trillion.
To fill the gap, the Treasury will borrow KSh 1.01 trillion domestically and KSh 99.5 billion externally.
Domestic Borrowing Strategy
Officials say focusing on domestic borrowing will reduce reliance on foreign lenders. They also want to manage refinancing risks. Analysts warn that increased domestic borrowing may raise interest rates and crowd out private lending. “We must monitor the impact on businesses and households,” said a Nairobi-based economist.
Fiscal Challenges
Kenya has faced repeated revenue shortfalls. Weak tax compliance, underperforming state-owned enterprises, and slower economic growth contributed to the gap. The government is introducing reforms to expand the tax base, improve collections, and prevent leakages. “Revenue reforms will secure fiscal sustainability,” Treasury officials said.
Debt service remains a major challenge. Kenya’s public debt now exceeds KSh 7 trillion, with domestic debt taking the largest share. Interest payments consume a large portion of revenue, limiting funding for development.
Economic Outlook
Officials expect the deficit may narrow if reforms succeed and economic growth strengthens. Growth in agriculture, manufacturing, and tourism could improve revenue collection.
However, uncertainties persist. Global market volatility, climate shocks, and fluctuating commodity prices could affect revenue. Analysts urge the government to balance fiscal discipline with growth-promoting investments. “We must invest in key sectors while maintaining fiscal stability,” said a policy expert.
Parliamentary Approval
The government must submit the final budget to Parliament before July 2026. Lawmakers are expected to examine domestic borrowing plans closely. They will focus on ensuring borrowing does not restrict private sector credit or raise inflation.
Conclusion
Kenya faces a critical fiscal year. The widening deficit highlights the need for disciplined spending and stronger revenue collection. Officials say careful implementation of reforms could stabilise finances while funding essential services and development projects.
Public Finance & Economic Development
Kenya Approves Infrastructure Sovereign Wealth Fund
Proceeds from state asset sales, including a stake in Safaricom, will help seed the new funds. Officials say this approach will crowd in private capital and support long-term growth.
Kenya creates an infrastructure sovereign wealth fund to finance projects, cut debt, and attract private investment.
NAIROBI, Dec 15 — Kenya’s cabinet approved the creation of an infrastructure fund and a sovereign wealth fund on Monday. The funds aim to finance development projects and reduce reliance on public borrowing.
President William Ruto first announced the plans in October. He said the funds will mobilise investment without pushing debt to unsustainable levels. (Reuters)
Funds aim to drive growth
The infrastructure fund will focus on transport, energy, and water. Meanwhile, the sovereign wealth fund will manage state assets to generate returns for long-term spending.
Officials expect the funds to attract pension funds, private equity, development finance institutions, and sovereign investors. Consequently, Kenya hopes to broaden its investment base.
Privatisation to seed financing
The government plans to sell part of its Safaricom stake to fund the infrastructure vehicle. This approach allows the government to ring-fence proceeds for infrastructure without adding debt.
Finance Cabinet Secretary Ephraim Mwangi Maina said, “We will crowd in private capital while maintaining fiscal discipline.”
Debt pressures drive reform
Kenya’s public debt exceeded 70% of GDP in recent years. High debt limits government spending and increases borrowing costs.
Economist James Shikwati said, “The success of these funds depends on clear governance and transparency.”
IMF talks continue
The cabinet’s decision comes as Kenya prepares for an IMF staff visit in January 2026. They will discuss a possible new lending programme focused on fiscal consolidation and reforms.
Monetary easing supports growth
The Central Bank of Kenya cut its benchmark rate several times in 2025. The moves aim to lower borrowing costs and stimulate private-sector investment. Consequently, officials hope to revive economic activity and support growth.
Infrastructure priorities under new model
Major projects, including the Naivasha–Kisumu Standard Gauge Railway and power transmission upgrades, will benefit. Energy expansion is supported by KETRACO public-private partnerships, aligning with Kenya’s broader investment strategy.
Governance and oversight
Economists and civil society groups urge strong governance to prevent mismanagement. They recommend transparency, independent audits, and clear reporting frameworks to attract investors.
Parliamentary next steps
The cabinet will submit draft legislation to parliament soon. Lawmakers will review mandates, governance structures, and reporting requirements.
Public Finance & Economic Development
IMF Kenya Programme Talks Resume in January
IMF Kenya programme talks resume as staff plan a January visit to Nairobi. Discussions focus on fiscal reforms, debt sustainability, and new funding.
IMF Kenya programme talks resume as staff visit Nairobi in January to discuss funding, fiscal reforms, and debt sustainability measures.
IMF Staff to Visit Kenya in January for Fresh Talks
Nairobi, Dec. 10, 2025 — The IMF Kenya programme will enter a new phase as International Monetary Fund staff prepare to visit Nairobi in January to discuss a potential support programme. This follows a recent meeting between President William Ruto and IMF Managing Director Kristalina Georgieva in Washington DC, aimed at reviving funding negotiations for the East African economy.
Central Bank of Kenya (CBK) officials have emphasized the urgency of a “funded programme” that would unlock fresh support while ensuring fiscal stability. In a statement, the CBK Governor said: “We continue discussions with the IMF on getting a new funded programme. We expect a staff visit in January to formalize negotiations.” (Reuters)
Background: Why Kenya Needs a New IMF Programme
Kenya’s previous $3.6 billion IMF facility expired in April 2025, leaving the country reliant on limited external financing.The upcoming IMF Kenya programme discussions aim to resolve critical issues, including fiscal reforms, revenue generation, and debt.The upcoming IMF Kenya programme discussions aim to resolve critical issues, including fiscal reforms, revenue generation, and debt sustainability.
Negotiations have previously stalled over the classification of securitised government debt. Kenya maintains that certain liabilities, held by special-purpose vehicles, are not sovereign obligations, but the IMF views them as government debt. This disagreement has repeatedly delayed agreement, complicating the path to new funding.
Analysts note that securing a renewed IMF programme is pivotal for Kenya as it grapples with high public debt, rising expenditure pressures, and global interest rate volatility.
January Mission: Key Objectives
The IMF staff mission, scheduled for mid-January, will review Kenya’s financial performance, tax revenue targets, and plans for expenditure reforms. Officials expect discussions to cover debt sustainability, fiscal discipline, and potential lending support to stabilize the economy.
“The IMF Kenya programme is critical for restoring investor confidence and easing foreign-exchange pressure,” said an economist familiar with the discussions. “It will determine whether Kenya can maintain macroeconomic stability in 2026.”
Government officials stress that a successful programme could unlock billions in funding while supporting public services and key infrastructure projects.
Challenges for Implementation
Past IMF agreements required Kenya to meet strict performance benchmarks, including revenue collection targets and expenditure controls. Failure to meet these targets contributed to the previous programme’s expiry in April 2025.
“Without agreement on fiscal reforms and debt classification, any new IMF Kenya programme may be delayed,” said a policy analyst in Nairobi.
The government is now working to reconcile internal fiscal policies with IMF conditions, aiming for a balanced approach that maintains economic sovereignty while meeting international requirements.
International Implications
The upcoming mission has drawn attention from investors and regional partners. Uganda, Tanzania, and Ethiopia are closely monitoring developments, as Kenya’s fiscal stability impacts East African trade corridors, currency flows, and regional projects.
The IMF’s engagement also signals continued international interest in supporting emerging economies amid global economic uncertainties. Analysts say the January visit could set the stage for similar negotiations in neighboring countries if Kenya achieves a successful agreement.
Outlook
The IMF Kenya programme talks scheduled for January will be a defining moment for the country’s economic policy. Success could enhance fiscal discipline, restore investor confidence, and improve access to international funding, while delays may intensify economic pressures and weaken regional economic stability.
“Kenya’s next steps will determine whether the IMF deal becomes a lifeline or another missed opportunity,” said a senior economist in Nairobi.
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