The World Bank has approved a Sh138 billion ($1.0 billion) budget support loan for Kenya under the Fiscal Sustainability and Inclusive Green Growth Development Programme Operation (DPO).
Kenya will get the cash after its request to the World Bank to raise the amount by 33 percent due to the tightened global financing conditions, which have seen it shelve a planned Eurobond issuance that had been slated for the current financial year.
Half of the new Sh138 billion loan will be drawn from the World Bank’s International Development Association (IDA), which targets low-cost financing to low-income economies while the remaining half will be drawn from the International Bank for Reconstruction and Development, (IBRD) which, unlike the IDA, extends semi-concessional financing.
The IBRD tranche of the loan has a maturity period of 18.5 years with a variable interest rate set at 85.0 basis points above the Secured Overnight Financing Rate, which is currently at five per cent.
The World Bank says the Kenyan government has committed to strengthen fiscal consolidation and undertake prudent debt management measures as part of the terms attached to the latest financing.
“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.
The government has also committed to greater transparency and accountability as part of the latest financing from the World Bank.
The restructuring of State-owned enterprises is also part of the agreement with the Bretton Woods lender.
“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 latest financing comes just a week after the International Monetary Fund concluded its fifth review of the programme with Kenya, paving the way for Kenya to draw a further Sh56.8 billion from its IMF loan.
The conclusion of the IMF’s fifth review also granted Kenya access to a new Sh75.3 billion loan through the fund’s Resilience and Sustainability Facility.