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CBK announces fresh Sh240 billion World Bank funding

Kenya is expecting new funding from the World Bank to the tune of Sh240.4 billion ($1.5 billion) before the culmination of the current fiscal year in June.

CBK Governor Nominee Kamau Thugge

The Central Bank of Kenya (CBK) recently unveiled the details of this forthcoming financial assistance, indicating that the disbursement is scheduled to occur between March and April.

CBK Governor Kamau Thugge affirmed this, stating, "We are also expecting disbursements from the World Bank, around March and April, of around $1.5 billion, according to the National Treasury."

This allocation signifies an extension of support from the World Bank, which has historically channeled funds to Kenya through its Development Policy Operations facility, disbursing amounts ranging from Sh120.2 billion ($750 million) to Sh160.3 billion ($1 billion) annually in recent years.

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The injection of this new funding is expected to alleviate concerns regarding foreign currency reserves.

The CBK governor also said that Kenya had recently received support from the International Monetary Fund (IMF) and the Trade and Development Bank (TDB).

The IMF disbursed $684 million (Sh110 billion) in January and TDB disbursed $400 million (Sh64 billion) between December 2023 and January 2024.

On January 18, National Treasury and Economic Planning Cabinet Secretary Njuguna Ndung'u revealed the priority areas in which the government plans to utilize the $684 million loan by IMF.

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The $684.7 million disbursement comprises $624.5 million under the EFF/ECF and an additional $60.2 million under the Resilience and Sustainability Facility (RSF).

The Extended Fund Facility provides financial assistance to help address structural weaknesses that require time to address. To implement medium-term structural reforms, the EFF offers longer program engagement and a longer repayment period.

The Extended Credit Facility provides medium-term financial assistance to tackle protracted balance of payments problems.

The Resilience and Sustainability Facility provides affordable long-term financing to support reforms to reduce risks to prospective balance of payments stability, including those related to climate change and pandemic preparedness.

1. Macroeconomic Stability Enhancement

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A significant portion of the funds is earmarked for maintaining macroeconomic stability. The government intends to strengthen its reserves, a crucial element in safeguarding the nation against external shocks.

The funds which will be disbursed in dollars will help meet the demand for the green back, which has been high in the last few years. For most of 2023, the Central Bank of Kenya has been maintaining foreign cash reserves below the recommended threshold.

The Kenyan currency has also been shedding value against the dollar, reaching $1=Sh160 on January 17.

2. Budget Support and Fiscal Resilience

Essential budget support is another focal point for the disbursement. By directing a portion of the funds towards fiscal consolidation, the government aims to fortify its fiscal position, after facing a cash crunch.

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3. Strengthening Climate Resilience Efforts

A portion of the funds will be directed towards initiatives under the Resilience and Sustainability Facility (RSF).

This facility is specifically designed to support Kenya in adapting to climate-related shocks and fostering the development of a green and resilient economy.

4. Addressing Geopolitical Challenges

Kenya's economy has demonstrated resilience in the face of various challenges, including the COVID-19 pandemic, droughts, floods, and disruptions in global supply chains due to heightened geopolitical tensions.

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The strategic utilization of the IMF loan can be seen as a proactive measure to address these challenges and sustain the positive economic trajectory.

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