The national treasury is targeting Kshs 136.5 billion loan from the World Bank. This has been necessitated by the cash flow crisis caused by dwindling foreign exchange reserves that have taken a hit from the weakening shilling.
The global lender committee is set to meet on May 26 to approve Kshs 136.5 billion to Kenya through its Development Policy Operation (DPO) framework.
If approved, the lender will be expected to wire the funds to the exchequer in a month given that the financing has been budgeted for the financial year 2022/23 ending on June 30.
Among the reforms attached to the proposed funding is the strengthening of domestic revenue mobilisation with a focus on the budding digital economy.
The World Bank had initially indicated the potential loan to Kenya was USD 750.0 million before the ticket size was upsized to USD 1.0 billion in March 2023 with the programme’s theme changed from the previous ‘Strengthening Economic Management for Resilient and Inclusive Growth’ to ‘Fiscal Sustainability and Inclusive Green Growth Development Policy Operation’.
Read: Kenya Inks Kshs 407 Billion Loan from African Export-Import Bank
Unlike the earlier plan, the financing is now expected to place a special focus on climate change mitigation and adaptation.
Among the proposals in the Draft Policy is the set-up of a green investment bank to provide a range of funding instruments and associated incentives to support the public and private sectors in overcoming barriers to making green investments at scale.
According to the programme document underpinning the planned financing from the World Bank, the government will be keen to realise three pillars.
The first pillar entails the creation of fiscal space in a transparent and equitable manner; the second pillar focuses on enhancing competitiveness to boost exports in agriculture and the third is on improving governance and financial inclusion to foster a private sector-led growth model.
The World Bank wants the government of Kenya to commit to greater transparency on matters of public debt management.
“The operation will support improved debt sustainability by making the debt management framework more transparent and by requiring the government to engage with Parliament on actionable steps to reduce debt”, the programme document states.
This comes on the backdrop of a surging external debt coupled with weakening Kenyan shilling against the dollar, which now trades at 136.7. Data from the central bank shows that Kenya’s total external debt as of January stood at Kshs 4.7 trillion.
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