Treasury eyes fresh Sh91.9b World Bank loan to fund budget

Treasury Cabinet Secretary Njuguna Ndung’u. [File, Standard]

The National Treasury is eyeing a Sh91.9 billion fresh loan from the World Bank as President William Ruto’s administration seeks cheaper sources of cash to support the Budget.

Treasury Cabinet Secretary Njuguna Ndung’u Tuesday said the loan will be under “concessional terms” and will help the government manage public debt.

Kenya qualified for this type of financing technically known as development policy operations, or DPO, in 2019 and has since received four such loans from the World Bank, the last one in March this year. "The government has lined up an additional DPO of approximately $750 million (Sh91.9 billion) for the current financial year,” said Prof Ndung’u.

Since 2019, Kenya has received a combined resource envelope of $3.25 billion (Sh398.5 billion) under the four World Bank Development Policy Operation loans or DPOs. 

“These resources helped to reduce fiscal pressures by making public spending more efficient and transparent while reducing the fiscal costs and risks,” said Ndung’u.

He spoke in Nairobi during the launch of the latest World Bank Country Partnership Framework for Kenya for the next five years up to 2028.

Treasury is trying to balance its debt portfolio after expensive commercial debts piled up and became expensive to repay, taking up more than 60 per cent of tax revenues.

Kenya in November bagged $433 million (Sh52.66 billion) from the International Monetary Fund (IMF) to finance the Budget and help the new administration fight drought.

Ndung'u reckons reliance on institutions like the IMF and the World Bank in the medium term to bridge the budget deficit would help reduce debt and other vulnerabilities.

“Indeed, the financing provided by the World Bank is aligned to these principles by offering us concessional terms that will improve our capacity in liability management,” he said.

The World Bank has already warned that Kenya’s debt – which is fast approaching the allowed Sh10 trillion limit – remains sustainable, but its risk of debt distress remains high.