World Bank Kenya
Keith Hansen, World Bank Country Director for Kenya.

Kenya has contracted a new Kes86 billion ($750 million) loan from the World Bank to help accelerate the country’s ongoing recovery from the COVID-19 economic fallout.

The facility under World Bank’s development policy operations (DPO) is the fourth in four years with proceeds going into anchoring the country’s post-COVID-19 pandemic recovery.

The financing will help strengthen fiscal sustainability through reforms that contribute to greater transparency and the fight against corruption, the World Bank explained.

Proceeds from all four DPOs, which have an annual interest cost of approximately 3 percent, now stand at Kes372 billion ($3.25 billion).

The DPO is the second in a two-part series of development operations initiated at the onset of the pandemic two years ago that provides low-cost budget financing along with support to key policy and institutional reforms.

“Kenya has maintained the momentum to make critical reforms progress despite the disruption caused by the pandemic,” said Keith Hansen, World Bank Country Director for Kenya.

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“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.”

The financing is expected to create a platform for investments in least-cost, clean power technologies, and enhance the legal and institutional set up for Public Private Partnerships (PPPs) to attract more private capital in Kenya’s infrastructure sector.

It will also help in aligning clean energy investments to demand growth and ensuring competitive pricing through a transparent, competitive auction-based system that has the potential to generate savings of about $1.1 billion over ten years at current exchange rates.

The DPO will also support the country’s ability to handle future pandemics through the establishment of the Kenya National Public Health Institute (NPHI), which will coordinate public health functions and programs to prevent, detect, and respond to public health threats, including infectious and non-infectious diseases, and other health events.

Further reforms will also seek to modernize the land market and improve transparency by updating the Rating Act and the Rating for Valuation Act to align the legal framework with devolution and to provide counties with the legislative framework to review and update their valuation rolls.

This policy framework will also strengthen both overall environmental (including climate change mitigation and adaptation) and water resource management.

“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,” said Alex Sienaert, Senior Economist for the World Bank in Kenya.

DPOs are used by the World Bank to support a country’s ambitious policy and institutional reforms with a view to accelerating inclusive growth and poverty reduction.

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