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AfDB supports Kenya with €73 million loan to boost economic recovery

The African Development Bank granted Kenya a €73 million loan to aid Phase III of the Competitiveness and Economic Recovery Support Programme, with the funding extending through the fiscal year 2023-2024.

AfDB board supports Kenya with €73 million loan
  • This was revealed in a meeting of the board of directors of the African Development Bank in Abidjan on 29 November 2023.
  • The loan will help the government to implement other policy measures to further strengthen resilience and economic recovery across different sectors.
  • Kenya is currently facing acute liquidity challenges, driven by uncertainty surrounding its capacity to secure funding from financial markets.

This was revealed in a meeting of the board of directors of the African Development Bank in Abidjan on 29 November 2023.

The loan is intended to build resilience and support inclusive post-Covid-19 economic recovery, by improving economic governance and boosting industrial development and competitiveness.

Nnenna Nwabufo, the Bank Group's Director-General for East Africa said "Kenya is pursuing the vigorous recovery of its economy after the Covid-19 pandemic and is currently faced with significant shocks. The country is facing its worst drought in 40 years and the consequences of the Russian invasion of Ukraine,"

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She noted that "This additional €73 million in financing, approved today by the Bank's Board of Directors, will enable the country to consolidate the progress it has already made and allow the Government to have fiscal space to deal with the impact of external shocks,"

The program will support Kenya's medium- and long-term development across three key components: ensuring fiscal consolidation for the sustainability of public finances, strengthening industrial development and competitiveness, and promoting economic and social inclusion.

According to AfDB, the programme is designed as a programmatic General Budget Support operation, and phase I and II have enabled the Kenyan Government to fill the funding gaps for the fiscal years 2021/22 and 2022/23, enabling it to carry out post-Covid-19 economic recovery.

"Phase III of the programme will support the roll out of the electronic procurement system, the Public Finance Management Amendment bill 2023 to improve debt management framework; privatization bill and ownership policy that address governance and financial challenges of state-owned enterprises; and the social protection policy and the roll-out, in 29 counties, of the enhanced single registry for Social-Protection,"

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"It will also help the government to implement other policy measures to further strengthen resilience and economic recovery across different sectors,"

"These measures will help consolidate the progress made during the first two phases of the programme. The programme comes in support of the Kenyan Government's strategy to extend the average duration of the public debt portfolio in order to reduce its servicing costs over the long term," it said.

Kenya is currently facing acute liquidity challenges, driven by uncertainty surrounding its capacity to secure funding from financial markets ahead of the maturity of a $2 billion Eurobond in June 2024.

President Ruto had said Kenya will repay $300 million of its $2 billion Eurobond in December, ahead of its June maturity date.

The decision comes after Kenya explored funding options, including seeking support from multilateral lenders such as the IMF and World Bank, and considering syndicated loans to facilitate the repayment.

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The IMF recently announced a staff-level agreement with the country, allowing for immediate access to $682.3 million and an increase in the current program's funding by $938 million.

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