Kenya Receives a $1 Billion Loan from the World Bank

The lending will occur via an instrument known as a Development Policy Operations (DPO) loan, which obligates Kenya to implement reforms intended at creating fiscal space, enhancing agricultural competitiveness, and enhancing governance.

Aghassi Mkrtchyan, Senior Economist for the World Bank in Kenya, said in a statement, "The government's reforms, supported by the DPO, will help to achieve fiscal consolidation, which is essential for reducing the debt burden and related risks in an equitable and sustainable manner."

President William Ruto, who was elected last year, has vowed to restore fiscal discipline after his predecessor allowed the public debt to balloon.

However, civil servants and political opponents have resisted his proposal to increase taxes on a broad range of economic activities as part of the finance measure that his government will present to parliament next month.

In 2019, Kenya became eligible for financing under the DPO instrument and has since received four such loans, with the most recent coming in March.

In accordance with the latest agreement, Kenya will eliminate administrative price setting for publicly procured cereals and streamline its retreat from commercial investments, according to the World Bank.

Kenya's finances have been strained by increasing debt repayments and the worst drought in the Horn of Africa in four decades.

Moody's downgraded Kenya's senior unsecured debt rating as well as its long-term foreign-currency and local-currency issuer ratings earlier this month, citing an increase in government liquidity concerns.

The country's central bank projected in March that the economy would expand by 5.8% in 2023, up from 4.8% in 2022.