World Bank cuts expected Kenya financing by Sh39bn
The World Bank's fresh financing is expected to complement recent dollar inflows into the country
What you need to know:
- The new funding is expected to prop resources available for budgetary support.
- The Washington-based lender will still hand Kenya a remarkably large disbursement.
The World Bank Group has scheduled a Sh157.7billion ($1.2billion) new financing to Kenya in the current financial ending June, marking a Sh39.3billion cut compared to the Sh197billion ($1.5billion) earlier anticipated by the National Treasury.
A revised plan by the World Bank said the new funding would be approved on April 30.
Central Bank Governor Kamau Thugge had in February revealed that Kenya expected a fresh $ 1.5 billion (Sh197 billion) financing from the World Bank around March or April this year.
“We are also expecting disbursements from the World Bank, around March and April of around $1.5 billion, according to the National Treasury,” Dr Thugge said on February 7.
The World Bank said the new funding will be drawn from its Development Policy Financing (DPF) and used to promote efficiency, equity, and transparency of public finance. The funds will also help sharpen the competitiveness of the labour market in Kenya and boost climate action.
“This DPF is expected to generate public expenditure savings through efficiency measures, strengthen the national social protection system, and reduce corruption,” the World Bank said.
“To foster more competitive and inclusive product and labour markets, the DPF is expected to reduce the number of firms identifying licensing and permits as a major constraint, enabling private capital by promoting competition, raising the number of students enrolled in TVETs and increasing the number of refugees and asylum seekers able to access social services.”
The World Bank’s DPF provides rapid financing to help a borrower address actual or anticipated development financing requirements.
It supports borrowers in achieving poverty reduction and climate-friendly sustainable and inclusive growth through a programme of policy and institutional actions.
The new funding is expected to prop resources available for budgetary support, helping fill a fiscal deficit estimated at Sh785 billion for the 2023/24 fiscal year.
Despite the marginal scale down in expected financing, the Washington-based lender will still hand Kenya a remarkably large disbursement going by its typical financing of between Sh98.6 billion ($750 million) and Sh131.5 billion ($1 billion) under development policy operations facilities in recent years.
The Bank’s funding is expected to increase the supply of foreign exchange into the economy, further firming up the recent gains made by the Kenya shilling against major world currencies.
The fresh financing is expected to complement recent dollar inflows into the country including the recently oversubscribed Eurobond issue which financed the partial buyback of Kenya’s Sh263.1 billion sovereign.
