A report by the Parliamentary Budget Office (PBO) on the Budget Options for 2024/2025 and the Medium Term has revealed a worrying trend of foreign investors leaving the country.
Per the report released in February, Kenya risks losing these investors due to the reduced profits from the Nairobi Securities Exchange (NSE).
"The erosion of investor confidence and reduced capital formation stemming from the struggling stock market collectively contribute to a challenging economic landscape for businesses across sectors," read part of the report.
In 2023, the NSE experienced a decline of 27.5 per cent, also over 6,000 foreign investors left the NSE in nine months.
This decline is a result of some investors pursuing higher returns and therefore moving to developed economies.
Additionally, another reason for the decline in foreign investors is the increasing interest rate in Kenya and other developing countries. Interest rates were increased by the Central Bank of Kenya from 7 per cent to 12.5 per cent which will also influence investor decisions.
Also, another reason is the review of tax measures and a shortfall in revenue collection. These measures affect consumer behaviour and investor confidence in the country.
Cumulatively, these factors influence the business environment which results in long-term economic stability and growth projections.
According to the report, another reason is Kenya's debt and the surging borrowing costs which makes long-term bonds more expensive. This has discouraged foreign investors.
"In the current global macroeconomic environment, the decline in international appetite for Kenyan government bonds is pronounced, with investors now demanding a premium to offset the perceived risks," read part of the report.
In the report, Kenya was urged to adopt more measures to regain investor confidence which will subsequently boost the economic growth of the country.
Meanwhile, in another report, Quarterly Economic and Budgetary Review Report, from the National Treasury it was revealed that investors were moving from Kenya to the US and other nations.
This decline was attributed to global monetary policy tightening forcing investors to look for other safer areas.
In 2023, the Henley Private Wealth Migration Report 2023, 100 millionaires were reported to have left the Kenyan market in 2022 due to increased taxation.
