Kenya has received a $750 million (Ksh85.8 billion) loan from the World Bank intended to accelerate economic recovery in the country following the impact of Covid-19.
It is the second in a two-part series of Development Policy Operations (DPOs) initiated in 2020. DPOs are used by the World Bank to support countries’ policy and institutional reforms to catalyze growth and poverty reduction.
The total annual interest cost of the Kenya DPO is approximately 3.0%.
As part of the deal, Kenya is required to make various commitments on fiscal reforms. Among them is the roll-out of a new public procurement platform to be piloted by 5 ministries from 2023
An overview of the loan indicates that it hinges on three pillars; investing in green energy technologies, improving fiscal and debt management, and strengthening the governance framework for Kenya’s natural and human capital.
“Fiscal and debt reforms to make spending more transparent and efficient, and enhance domestic debt market performance; (2) electricity sector and public-private partnership (PPP) reforms to place Kenya on an efficient, green energy path, and boost private infrastructure investment; and (3) strengthening the governance framework of Kenya’s natural and human capital which includes the environment, land, water and healthcare,” the World Bank expounded, highlighting key focus areas.
The World Bank commended the government’s efforts to boost economic recovery so far while highlighting the expected impact of the package.
“The government’s reforms supported by the DPO help reduce fiscal pressures by making public spending more efficient and transparent, and by reducing the fiscal costs and risks from key state-owned entities,” stated Alex Sienaert, Senior Economist for the World Bank in Kenya.
“In addition, strong and sustainable growth is essential to achieve medium-term fiscal consolidation and to reduce the debt burden and related risks. The package includes measures to spur more private investment and growth, whilst strengthening the management of Kenya’s natural and human capital which underpin it’s economy,” he added.
The World Bank also emphasized plans for increased public-private partnerships in infrastructure and energy.
“In the infrastructure sector, measures will create a platform for investments in least-cost, clean power technologies, and enhance the legal and institutional setup for PPPs to attract more private investment. Aligning clean energy investments to demand growth and ensuring competitive pricing through a transparent, competitive auction-based system has the potential to generate savings of about $1.1 billion over ten years at current exchange rates,” they noted in a statement.