Kenya receives Sh85.6 billion loan from World Bank

Mr. Keith Hansen, World Bank Country Director for Kenya, Rwanda, Somalia, and Uganda [File, Standard]

Kenya has received a loan of Sh85.6 billion from the World Bank with part of the money expected to help bring down the cost of electricity.

The World Bank announced today that it had disbursed $750 million Development Policy Operation (DPO) to the government, the second in a credit facility that is aimed at helping improve transparency and fight corruption.

World Bank Country Director for Kenya Keith Hansen (pictured) said the government has maintained the momentum to make critical reforms progress despite the disruption caused by the pandemic.  

“The World Bank, through the DPO instrument, is pleased to support these efforts which are positioning Kenya to sustain its strong economic growth performance and steering it towards inclusive and green development,” he said.

Kenya Power is likely to benefit from the latest financing, with the World Bank noting it will improve efficiency.

The reforms are estimated to generate savings of about $1.1 billion (Sh125.6 billion) over the next 10 years, or $110 million (Sh12.6 billion) per year on average.

Overall, the funds are meant to aid Kenya to recover from the adverse effects of the Covid-19 pandemic through a raft of measures to increase tax collection and reduce pressure from State-owned corporations.

This is the second DPO - a form of lending used by the World Bank to support a country’s ambitious policy and institutional reform agenda - to help accelerate inclusive growth and poverty reduction.

The terms of the loans are friendly, with Kenya expected to pay an interest rate of less than three per cent. It will be paid in 30 years and has a grace period of five years.

“The government’s reforms supported by the DPO help reduce fiscal pressures by making public spending more efficient and transparent,” said Alex Sienaert, senior economist for the World Bank in Kenya.