The downgrading of the Kenya’s debt repayment rating last week did little to cushion the country from more external debt.
This is after the World Bank Group okayed an increase in Kenya’s loan request by Sh32 billion.
This now means that Kenya will receive $1 billion (Sh129 billion) as budgetary support in June.
The disbursement under Development Policy Operations (DPO) facility will provide additional resources to Kenya which will in part plug the budget deficit in the 2022/23 fiscal year to June.
“The program development objective is to enhance sustainable, inclusive and green growth by creating fiscal space in a sustainable manner, increasing competitiveness to boost exports in agriculture and improving governance to facilitate inclusive private sector-led development,” said the World Bank in a disclosure.
World Bank’s Development Policy Operations financing provides rapidly-disbursing financing to help countries address actual or anticipated development financing requirements.
The loan is expected to be approved late in the current financial year with the published multilateral lender’s board calendar showing no planned meetings with Kenya over the facility through the next three months to May.
Flows from the DPO financing which is due before the end of June is expected to partly replenish Kenya’s depleted forex reserves which have been eroded by higher external debt repayments and support for the shilling through hard currency sales by the Central Bank of Kenya.
Treasury Cabinet Secretary Njuguna Ndung'u, speaking at the launch of the World Bank's Country Partnership Framework for 2023-28 in December said that despite Kenya eyeing $750 billion at the time, discussions were open to increase the figure to $ 1billion.
The DPO is the second in a two-part series of development operations initiated in 2020 that provides low-cost budget financing along with support to key policy and institutional reforms.
In 2021, Kenya received a Sh80.9 billion ($750 million) loan from the World Bank to support its budget and help the East African economy recover from the effects of the Covid-19 pandemic.
