Dubbed Development Policy Operation (DPO) fund, the money will help the country strengthen its sustainability through reforms that are hoped to contribute to greater transparency and the fight against corruption.
“The government’s reforms supported by the DPO help reduce fiscal pressures by making public spending more efficient and transparent, and by reducing the fiscal costs and risks from key state-owned entities,” Alex Sienaert, senior economist for the World Bank, said.
This is the second loan in a two-part series that began in 2020 with the goal of providing Kenya with a low-cost budget financing option while also making institutional and policy reforms.
Kenya is expected to implement reforms such as promoting transparent and efficient spending, investing in green energy, and building governance structures in addition to using cash from the program.
Previously, as part of the DPOs’ fiscal management reforms, public procurement was moved to a new electronic platform in order to decrease the chances for corruption.
Apart from providing funding for budget support, the loan proceeds are projected to strengthen Kenya’s store of usable foreign currency, which serves as a major cushion for the shilling in the payment of external debt alongside utilities.
Kenya has already received its fourth loan from the DPO facility, bringing the total amount borrowed to Ksh371.8 billion ($3.25 billion).
The loan’s total yearly interest cost for Kenya is 3 per cent, which is a reasonable rate when compared to commercial loan interest rates.
Apart from the World Bank Kenya is also in an ongoing program with the International Monetary Fund (IMF).
The amount the country is expected to access from the IMF is Ksh 267.7B($2.34B) by June 2024.
As of December 2021, Kenya has accessed Ksh111.3B($972.6B)