A Ksh138.45 billion ($1.0 billion) budget assistance loan from the World Bank has been authorized for Kenya as part of the Fiscal Sustainability and Inclusive Green Growth Development Programme Operation (DPO).
Kenya will get the money after asking the World Bank to increase it by 33% as a result of the tighter global financing circumstances, which have caused it to postpone a planned Eurobond sale that was supposed to take place in the current fiscal year.
The International Development Association (IDA) of the World Bank will provide low-cost financing to low-income economies for half of the new Ksh138.45 billion loan, and the International Bank for Reconstruction and Development (IBRD), which extends semi-concessional financing, will provide the other half.
With a variable interest rate set at 85.0 basis points above the Secured Overnight Financing Rate, which is presently at 5%, the IBRD portion of the loan has an 18.5-year maturity duration.
According to the World Bank, as a condition of receiving the most recent loan, the Kenyan government agreed to deepen budget consolidation and implement responsible debt management measures.
“The first bundle of policy reforms will target the creation of fiscal space in a sustainable and equitable manner, including revenue and expenditure measures to support fiscal consolidation, strengthening the debt management framework, and protecting pro-poor expenditures. These will be augmented by a second set of reforms that improve competitiveness to boost agricultural exports, which is both a powerhouse sector where Kenya has a clear comparative advantage and the sector employing most of Kenya’s poor,” says the World Bank in a statement.
As part of the most recent financing from the World Bank, the government has also pledged to increase accountability and openness. The arrangement with the Bretton Woods lender also includes reorganizing State-owned firms.
“In governance, the DPO supports an important set of initiatives to promote objective decision-making through the Conflict-of-Interest Bill, to streamline the state’s orderly exit from commercial investments through amending the State-Owned Enterprises Privatization Act,” the World Bank says.
The most recent funding comes only one week after the IMF completed its sixth assessment of Kenya's program, clearing the way for Kenya to receive an additional Ksh56.8 billion ($410.26 million) from its IMF loan.
Kenya was also given access to a fresh Ksh75.3 billion ($543.88 million) loan under the IMF's Resilience and Sustainability Facility at the completion of the fifth review.