 World Bank financing package to support budget reforms and sustainability targets.){kind=link}
NAIROBI, Kenya- Kenya has secured a US$1.25 billion (about Sh161.9 billion) financing package from the World Bank, providing a major boost to the country’s external financing position and budget support as the government pushes ahead with fiscal and economic reforms.
The package comprises a US$750 million (Sh97.1 billion) Development Policy Operation (DPO VII) and an additional US$500 million (Sh64.7 billion) Sustainability-Linked Loan, according to details released following the World Bank’s approval of the facility.
The DPO VII financing is split between a US$410 million International Development Association (IDA) credit and a US$340 million International Bank for Reconstruction and Development (IBRD) loan.
The Sustainability-Linked Loan is tied to Kenya’s performance on agreed environmental targets, including reducing deforestation and expanding access to electricity in rural areas.
Under the arrangement, the cost of borrowing will vary depending on whether the government meets the agreed sustainability benchmarks.
According to the National Treasury, proceeds from the Sustainability-Linked Loan will be used to refinance expensive existing debt and provide budget support, helping ease pressure on public finances.
The approval comes less than two weeks after President William Ruto met World Bank President Ajay Banga during official engagements, and days after Kenya secured a JP¥25 billion (about Sh22 billion) Samurai Loan from Japan.
Together, the facilities are expected to strengthen Kenya’s foreign exchange reserves and improve its ability to finance government operations.
The World Bank said the financing supports Kenya’s programme to restore fiscal sustainability, improve transparency and efficiency in public finance, strengthen governance, enhance competition in product and labour markets, and accelerate climate action.
Among the key reform priorities identified by the lender are reducing the country’s Value Added Tax (VAT) gap, improving collection of personal income tax from non-PAYE taxpayers, and enhancing the collection and transparent allocation of non-tax revenues, including fees collected through the eCitizen platform.
The financing follows Kenya’s adoption of a Sovereign Sustainability-Linked Financing Framework, which enables the government to access loans and bonds whose pricing is linked to measurable environmental and social targets.