World Bank approves Ksh 138.5B loan to Kenya with conditions
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World Bank approves Ksh 138.5B loan to Kenya to ease debt burden and strengthen a weakening currency
World Bank approves Ksh 138.5B loan to Kenya to ease debt burden and strengthen a weakening currency.
The World Bank said on May 30 that it approved a Ksh138.5 billion loan to assist Kenya in reducing its debt load and stabilizing a depreciating currency.
Aghassi Mkrtchyan, a senior economist at the World Bank, said in a statement that the funds would be distributed through a Development Policy Operations (DPO) tool.
He stated that the agreement will obligate Kenya to make measures to improve budgetary flexibility, agricultural competitiveness, and governance.
“The DPO’s support for the government’s reforms will help to achieve fiscal consolidation, which is essential for reducing the debt burden and related risks in an equitable and sustainable manner,” the Economist stated.
In the agreement, Kenya will eliminate administrative price-setting for publicly procured cereals and streamline an exit from commercial investments.
Kenya met the criteria for DPO funding in 2019 and was awarded four of these loans, the most recent of which was in March 2023.
Earlier on Monday, May 29, President William Ruto raised concerns about the increasing dollar crisis in Kenya and worldwide, stating that it had strained business activities.
As a result of rising import costs and difficulties with debt servicing, the value of the Kenyan shilling against the dollar fell to a new record low of 138.50.
Ruto proposed the creation of an African export and import bank as a payment authority throughout the continent during the African Private Sector Dialogue on the African Continental Free Trade Area (AfCFTA) and the third Kenya International Investment Conference.
According to the Head of State, the move would eliminate the obstacles caused by the difference in currencies and allow investors to pay in local currencies instantly.
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“We are all struggling, and our businessmen are struggling to make payment for goods and services from one country to another because we are subjected to a dollar environment.
“Why are we bringing dollars in the middle of our trade? Our business people are stranded because we are looking for dollars,” lamented Ruto, at Safari Park Hotel, Nairobi, on May 29, 2023.
Further, he noted that the African Export-Import Bank had already embarked on building a centralised payment system across Africa known as the Pan African Payment and Settlement system.
“One of the challenges African countries face is the delay during transactions, as it takes about three to five days for the payment to get to the recipient’s bank, with multiple charges throughout the process,” he noted.
Most African local banks and businesses use US and European correspondent banks to complete payments between two African currencies.
The dollar and the Euro are among the top trading currencies during the foreign exchange.
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