World Bank $1b loan approval to salvage economy
The World Bank has opened the purse to lend Kenya $1 billion (Sh138 billion) to ease a cash crunch in the government amid high debts and a weakening shilling.
In a statement, the Bretton Wood Institutions’ senior economist to Kenya Aghassi Mkrtchyan said the loan will be disbursed through the Development Policy Operations (DPO), which is an instrument that commits Kenya to undertaking reforms that will create fiscal space as well as improve agricultural competitiveness and governance. “The government’s reforms, supported by the DPO, will help to achieve fiscal consolidation, which is essential for reducing the debt burden and related risks in an equitable and sustainable manner.”
DPOs are non-earmarked loans, credits, or grants supporting the country’s economic and sectoral policies and institutions. Kenya qualified for financing under the DPO facility in 2019, and has since tapped four loans under the facility, the last of which was received in March this year.
The loan was issued with the understanding that President William Ruto’s regime will undertake fiscal discipline and strengthen revenue mobilisation in the country.
According to the Statement, the government will eliminate administrative price-setting for publicly procured cereals and streamline its exit from commercial investments, among other reforms
Ruto rose to victory in September last year, promising to increase revenue collection to Sh6 trillion from the current Sh2 trillion in the next five years through tax reforms.
The Ruto administration has targeted to collect Sh3.03 trillion in the next budget through a series of tax measures outlined in the Finance Bill 2023 that has just gone through the public participation phase and is facing a backlash from the public and the opposition.