Kenya has opened a dialogue with the World Bank for a new concessional $750 million loan.
Kenya hopes to secure this loan by June 2023. If approved, this would mark the fifth time the World Bank is aiding the East African country with a relief fund from its Development Policy Operation (DPO) framework, which has afforded Kenya access to $3.25 billion (Sh399 billion at the present exchange rate) from the Bretton Woods institution.
The new loan will be a part of the Ksh280.7 billion ($2.3 billion) designated for external borrowing in the current financial year.
During the 2023 – 2028 Country Partnership Framework launch between the government and World Bank, the Cabinet Secretary for the National Treasury, Prof Njuguna Ndung’u said, “during the current IDA-20 cycle, the government has lined up an additional DPO of approximately $750.0 million for the current financial year. The proposed package under discussion with the World Bank aims at promoting sustainable, resilient, and inclusive growth. This will also promote human capital development as a major input to economic growth.”
Part of the country’s economic goals under the new administration led by president William Ruto is to reduce the country’s debt service.
During his presidential campaign, William Ruto assured that not only would Kenya settle its external debts, but it would also curb the region’s destructive habit of incurring debts.
Regardless of how admirable this goal may seem, it is easier said than done, as even the most successful nations in the world owe massive debts.
However, the National Treasurer has noted that accessing low-cost financing under the World Bank’s DPO framework aligns with ongoing efforts to steer Kenya toward a more sustainable fiscal path.
The DPO is a framework through which the World Bank supports a member country’s program of policy and institutional actions geared towards promoting growth and sustainable poverty reduction.
The last DPO financing received by Kenya was on June 10 last year when the World Bank approved Sh92 billion at a total annual interest and service cost of 3.1%.
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