How Kenya’s National Treasury, Parliament, And KNBS Are Blindly Measuring A Broken Economy

For years, Kenya’s economic policymakers—the National Treasury, Parliament, and the Kenya National Bureau of Statistics (KNBS)—have clung to outdated metrics that fail to capture the real state of the economy. While these institutions boast about GDP growth, inflation rates, and employment numbers, millions of Kenyans are stuck in poverty, businesses are closing, and the cost of living is unbearable. The disconnect between economic reports and lived reality raises a critical question: Are we measuring the economy the right way, or are we simply massaging numbers to fit a political narrative?

The Gross Domestic Product (GDP) remains the flagship indicator used to evaluate economic progress, yet it is a deeply flawed measure. GDP only reflects the total value of goods and services produced in a country without considering income distribution, informal economy contributions, or the actual purchasing power of citizens. Kenya’s GDP grew by 5.6% in 2023, according to KNBS, but what does that mean for a household struggling to afford unga at Ksh 250 per 2kg or a boda boda rider who earns less than Ksh 500 per day after expenses?

Inflation is another deceptive statistic. Official reports from KNBS indicate that inflation stood at 6.8% in December 2023, yet this figure is heavily manipulated by the choice of goods included in the consumer basket. While Treasury claims inflation is “manageable,” Kenyans know that fuel prices rose from Ksh 130 per liter in 2021 to over Ksh 220 in 2024, electricity tariffs have skyrocketed by more than 60%, and rent prices in Nairobi’s informal settlements increased by over 40% in two years. If the real inflation rate were measured based on essential goods and services, it would be closer to 15-20%, making life unsustainable for many.

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Inflation Mismatch – The official inflation rate is reported as below 7%, but real inflation (based on essential goods) is approaching 18% in 2024. SOURCE; SokoDirectory.Com

Unemployment data is another fraudulent figure. The KNBS reports an official unemployment rate of 5.7%, suggesting that Kenya is doing well compared to global averages. However, this statistic is misleading because it fails to account for underemployment, gig work, and disguised unemployment. The boda boda industry alone has over 1.2 million riders, many of whom are university graduates forced into informal work due to lack of formal employment opportunities. Additionally, over 80% of Kenyan businesses are in the informal sector, meaning their contributions to employment and economic output are largely ignored by traditional economic indicators.

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Factory Closures – The manufacturing sector is deteriorating, with 180 factories shutting down in 2024 alone, proving that the industrial economy is struggling despite reported GDP growth.

The manufacturing sector, which was once a pillar of the Kenyan economy, is collapsing. Official reports suggest manufacturing contributes 7.2% to GDP, yet factory closures have been on the rise. In 2023 alone, over 150 manufacturing firms shut down, citing high taxation, energy costs, and an unfavorable business environment. Imports from China and Turkey have flooded the market, further suffocating local industries. KNBS does not factor in the rate of factory closures when assessing the economy, leading to an overestimation of industrial strength.

A more accurate measure of economic performance would focus on household purchasing power and real wages. The average salary for a Kenyan worker has barely increased over the last five years, yet expenses have soared. A 2024 survey by FSD Kenya found that 58% of urban households cannot afford three meals a day, up from 42% in 2020. Real wage growth has stagnated, meaning that any perceived economic progress is only benefiting the wealthy elite.

Mobile Money Transactions – The economy is shifting towards digital finance, with M-Pesa transactions surpassing Ksh 35 trillion in 2024, yet the Treasury does not leverage this data effectively.

The housing crisis further exposes the flawed metrics used to assess economic well-being. The Treasury reports “economic stability,” yet over 60% of Nairobi’s population lives in informal settlements. Mortgage uptake remains below 30,000 active mortgages, despite a population of over 54 million people. The push for affordable housing has turned into a government cash grab, with mandatory deductions from salaries hurting low-income earners while benefiting politically connected developers.

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Household Food Insecurity – More than 58% of households in urban areas now experience food insecurity, up from 42% in 2020, yet government reports fail to capture this in economic assessments.

Mobile money transactions provide a more accurate reflection of the real economy. In 2023, Safaricom’s M-Pesa alone processed transactions worth Ksh 35 trillion, more than three times Kenya’s GDP. The Treasury and KNBS fail to analyze how mobile money reflects spending habits, income distribution, and economic activity in the informal sector. If properly assessed, M-Pesa data could expose how millions rely on digital credit to survive, with Fuliza disbursements surpassing Ksh 500 billion in 2023.

The cost of transport and logistics is another critical economic indicator that Parliament ignores. SGR freight costs remain prohibitively high, forcing businesses to use trucks despite skyrocketing fuel costs. Road congestion in Nairobi leads to over Ksh 50 billion in productivity losses annually, yet this is not accounted for in GDP calculations. If logistics efficiency were properly measured, it would reveal a deeply inefficient economy that fails to optimize its infrastructure investments.

Another overlooked indicator is alcohol consumption trends. While KNBS focuses on formal employment numbers, alcohol sales data suggests a struggling population. Consumption of illicit brews has surged in low-income areas as Kenyans shift from mainstream alcohol brands due to affordability issues. This trend highlights worsening economic conditions, yet it is ignored in national statistics.

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To fix this mess, Kenya must adopt new ways of measuring the economy. Policymakers need to abandon their obsession with GDP growth and focus on real indicators that reflect everyday life. New metrics should include:

1. Mobile money transaction volumes as a measure of economic activity.
2. Household consumption of essentials (unga, cooking oil, fuel, rent) as a true inflation measure.
3. Informal sector contribution by tracking hawkers, boda boda earnings, and gig work.
4. Real wage growth and disposable income to assess purchasing power.
5. Factory closures and SME survival rates to gauge industrial health.
6. Logistics efficiency, fuel prices, and freight costs to measure business competitiveness.
7. Housing affordability and rental stress levels to reflect the true state of urban life.
8. Tech innovation and startup funding to assess economic dynamism.

Kenya’s Parliament must stop approving Treasury’s misleading economic reports and push for comprehensive data reforms at KNBS. The time for sugar-coated statistics is over. If we continue relying on outdated metrics, we risk steering the country into deeper economic chaos while pretending everything is fine.

The Urgent Need for a New Economic Lens

Kenya cannot afford to remain trapped in the past, measuring its economy with outdated tools that ignore the suffering of millions. If the National Treasury, Parliament, and KNBS do not wake up, we will continue living under an illusion of prosperity while the real economy crumbles. The future demands bold action—it’s time to measure what truly matters.

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