Kenya contracts $750 million World Bank loan

NAIROBI, Kenya

Kenya has contracted a new Ksh.85.8 billion ($750 million) loan from the World Bank Group, the multilateral lender has disclosed.

In a statement, the World Bank says the financing which is part of its development policy operations (DPO) will go towards accelerating the country’s post COVID-19 recovery by anchoring fiscal sustainability.

The loan is the second from a two part series operation which was initiated in 2020 to provide Kenya with a low-cost budget financing option alongside implementing key policy and institutional reforms.

The loan’s total annual interest cost to Kenya is for instance three percent, a rate relatively cheaper than charges from commercial loans.

"The government's reforms supported by the DPO help reduce fiscal pressures by making public spending more efficient and transparent, and by reducing the fiscal costs and risks from key-State owned enterprises,” noted Alex Sienaert, a senior economist at World Bank Kenya.

Besides utilising funds from the program, Kenya is expected to undertake reforms ranging from promoting transparent and efficient spending, investments in green energy and strengthening governance frameworks.

This is Kenya’s fourth loan from the DPO facility in four years including Ksh.85.8 billion ($750 million) in June 2021, Ksh.114.4 billion ($1 billion) in 2020 and Ksh.85.8 billion ($750 million) in 2019.

This takes cumulative flows for Kenya from the World Banks DPOs to Ksh.371.8 billion ($3.25 billion).

Previous fiscal management reforms under the DPOs have seen the shifting of public procurement to a new electronic platform with the view to reduce the opportunities for corruption.

Besides propping up financing for budget support, proceeds from the loan are expected to firm up Kenya’s store of usable foreign currency which serve as a key cushion for the shilling alongside utilities in the payment of external debt.

Presently Kenya also has an ongoing program with the International Monetary Fund (IMF) which will see it access Ksh.267.7 billion ($2.34 billion) by June 2024.

So far, Kenya has tapped Ksh.111.3 billion ($972.6 billion) as of December last year.

The National Treasury has in recent years turned to concessional funding from multilateral lenders such as the World Bank and the IMF ditching expensive commercial and syndicated loans in the process.

$1=Ksh.114.40