Kenya among top borrowers from the World Bank in 2015

Workers tarmac a road. The bulk of World Bank cash went to finance infrastructure projects. [PHOTO:STANDARD/FILE]

Kenya is among top-ten borrowers from the World Bank Group (WB) having received about $1.3 billion (about Sh133 billion) in commitments from the bank in fiscal year 2015.

The amount secured from the international lender is the largest in the country’s history with the only other top African borrower listed by the bank’s 2015 annual report being Ethiopia.

According to the Bank’s Annual Report, Ethiopia received $1.4 billion (about Sh142 billion) as of June 2015.

Most of the funds that Kenya borrowed went towards financing 27 projects valued at about $4.3 billion (Sh439 billion) as of June 2015. The value of these projects is almost double what it was just five years ago, says the World Bank in another report Taking Stock 2015.

Investments are spread across many key sectors, ranging from hard infrastructure (roads and energy) to human development (health and community development) to managing climate risk (agriculture and coastal management) to strengthening institutions delivering public services (judicial reform).

Infrastructure takes up a big chunk of this bounty, gobbling up 61 per cent. Human development has been allocated 31 per cent, while management of climate risk takes up five per cent.

“About 18 out of 27 projects -covering $2,850 million in net commitments and in a range of sectors, including energy, water, transport and agriculture - are performing satisfactorily overall,” the report, Taking Stock 2015, read in part.

The Bretton Woods institution is satisfied with the progress of most of the projects. In the energy sector, for example, “geothermal energy production and modernizing power lines (the principal inputs) are performing satisfactorily,” notes the report.

However, there are concerns on the progress of around seven projects valued at slightly over $950 million in net commitments. The seven projects are in health, judicial reform and urban infrastructure. The lender feels that progress in these seven projects is either “moderately unsatisfactory” or “worse.”

As such they need some “intensive care” since they cannot achieve their objectives as they currently stand.

There is a need for better contract management and prompt procurement practices for these projects to proceed well.

“In some cases, lengthy response times in getting clearances for high-value contracts with complex technical aspects –sometimes taking up to 191 days for bank-financed urban infrastructure project contracts to be signed -have created a logjam in the project cycle,” states the World Bank.

For the seven projects, the World Bank also feels that the Government has been slow in providing “counterpart funds”-Government’s own resources. The bank gives the example of a “transport project” which did not have the resources to pay contractors working on roads.

All the Sh133 billion that Kenya borrowed came from the World Bank Group’s International Development Association (IDA)-which is the only one of the two World Bank Group lenders. The other is the International Bank for Reconstruction and Development (IBRD).

While the IDA provides loans, equity, and advisory services to stimulate private sector investment in developing countries, IBRD lends to countries with higher per capita incomes.

In March 2015, the World Bank Group’s Board of Executive Directors approved a total of $457.5 million (About Sh48 billion) for the Kenya Electricity Modernization Project. The amount includes an IDA credit of $250 million (Sh26 billion), an IDA guarantee of $200 million (Sh20 billion) and a $7.5 million (Sh767 million) grant from the Strategic Climate Fund-Scaling up Renewable Energy Programme.

The bank noted that the IDA guarantee will enhance Kenya Power and Lighting Company’s (KPLC’s) credit quality and enable it to raise about $500 million of new commercial debt with lower interest rates and longer tenors to replace existing debt that is placing a heavy burden on the company’s books.

The country’s external debt has accelerated, with the Government last month borrowing a syndicated loan of about $588 million (Sh60 billion) when it ran out of cash to finance projects in roads, energy, agriculture and water sectors.

Kenya’s public debt stands at around Sh2.1 trillion-about 40 per cent of the country’s Gross Domestic Product (GDP).

Other African countries that made it to the World Bank’s list of top ten borrowers included Egypt, Morocco, Nigeria, Tanzania and Ghana.

India, China, Colombia, Ukraine, Argentina, Turkey, Indonesia are the other non-African top-ten beneficiaries of the World Bank cash. Others include Bangladesh, Pakistan, Vietnam and Turkey.

The largest share of IDA’s commitments went to Africa which received a total of $10.4 billion (about Sh1 trillion).