World Bank approves Kenya budget support and sustainability loans

The World Bank on Tuesday approved a $750 million financing package for Kenya aimed at supporting economic reforms, reducing reliance on expensive domestic borrowing and strengthening the country's public finances.

The package includes a budget support operation known as a Development Policy Operation (DPO), which will provide $340 million from the International Bank for Reconstruction and Development (IBRD) and $410 million in highly concessional funding from the International Development Association (IDA), the World Bank said in a statement.

It is the seventh DPO Kenya has received since the first operation was approved in 2018.

The loan will support a country-led reform program to make public resources more transparent, efficient, and equitable and to reduce corruption. The World Bank says strengthening governance and preventing corruption are key parts of Kenya's reform program.

"By supporting reforms to address conflicts of interest, strengthen procurement systems, improve public financial management, and expand social protection, this operation will help Kenya reduce leakage, generate fiscal savings, and ensure that public resources deliver better results and reach the people who need them most," said Qimiao Fan, World Bank Division Director for Kenya. "It is also helping establish the foundational, business-enabling environment that is necessary to support higher and more inclusive growth and for the private sector to create jobs."

Kenya's public finances have been under strain due to high debt levels and wide fiscal deficits, increasing pressure on the government to reduce borrowing costs and improve fiscal management.

The World Bank also approved a sustainability-linked financing facility structured as a syndicated loan targeting about $500 million. The facility will be supported by credit enhancements aimed at reducing investor risk and lowering Kenya's borrowing costs.

The lender said the sustainability-linked financing would help Kenya diversify its sources of funding while supporting targets to reduce deforestation rates and expand access to electricity in rural areas.