Kenya set to receive KSh129bn World Bank loan
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World Bank to provide Sh129 billion loan to Kenya to boost the country’s foreign exchange reserves which have been on the decline
World Bank to provide Sh129 billion loan to Kenya to boost the country’s foreign exchange reserves which have been on the decline.
The World Bank Group has increased to Sh128.9 billion ($1.0 billion) a budget support loan for Kenya expected by June 30.
The sum is an increase of Sh32 billion over the soft loan’s initial announcement of Sh96.7 billion ($750 million).
The fund, which is officially known as a Development Policy Operation (DPO) facility, will give Kenya’s economy a much-needed break at a time when interest rates on loans denominated in dollars are relatively high and its foreign exchange reserves are declining.
The loan increase is in line with remarks by Treasury Cabinet Secretary, Prof Njuguna Ndung’u, who on December 6, 2022, indicated that the government was negotiating with World Bank for a large financing envelope.
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“During the current International Development Association cycle, the World Bank has lined up additional Development Policy Operation financing of $750.0 million for the current financial year. We have been trying to negotiate that to a $1.0 billion but Keith (the World Bank country director) has indicated that this is what is possible at the moment”, said Prof Ndung’u during the launch of the Kenya Economic Update.
According to Treasury documents, the terms of the planned DPO were last updated on March 2, and the same are still subject to board approval.
A DPO is a low-cost loan through which the World Bank supports a member country’s programme of policy and institutional actions geared towards growth and sustainable poverty reduction.
The terms of the planned DPO are not yet known. For context, however, the $750 million third DPO secured by Kenya in 2021 had a 30-year repayment period, including a grace period of five years and an interest rate charge of three percent per annum.
The documents further reveal that the title attached to the planned DPO has been changed from the previous ‘Strengthening Economic Management for Resilient and Inclusive Growth’ to ‘Fiscal Sustainability and Inclusive Green Growth Development Policy Operation’.
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