Last week’s downgrade of Kenya’s debt repayment rating did little to protect the country from additional external debt.
This comes after the World Bank Group approved an Sh32 billion increase in Kenya’s loan request, as Kenya is set to receive $1 billion (Sh129 billion) in budgetary support in June.
The disbursement under the Development Policy Operations (DPO) facility will provide Kenya with additional resources to help plug the budget deficit in the fiscal year 2022/23, which runs from June to June.
According to the World Bank, “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.”
The World Bank’s Development Policy Operations (DPO) financing provides rapid disbursement to assist countries in meeting actual or anticipated development financing needs.
The loan is expected to be approved late in the current fiscal year, with no meetings with Kenya scheduled for the next three months until May, according to the published multilateral lender’s board calendar.
Flows from the DPO financing, which is set for June, are expected to replenish Kenya’s depleted forex reserves, which have been eroded by higher external debt repayments and Central Bank of Kenya support for the shilling through hard currency sales.
Treasury Cabinet Secretary Njuguna Ndung’u stated in December at the launch of the World Bank’s Country Partnership Framework for 2023-28 that, while Kenya was targeting $750 billion at the time, discussions were ongoing to increase the figure to $1 billion.
The DPO is the second of a pair of development operations launched in 2020 to provide low-cost budget financing as well as support for key policy and institutional reforms.
The World Bank loaned Kenya Sh80.9 billion ($750 million) in 2021 to support its budget and assist the country in recovering from the effects of the Covid-19 pandemic.