President William Ruto’s government is rushing against time to secure a Ksh126 billion loan from World Bank.
Kenya has only one month to secure the loan which is meant to clear pending bills incurred during the 2022/2023 financial budget.
This is the second mega loan from the World Bank in slightly over a year after the financial organisation disbursed Ksh103 billion in March 2022.
World Bank will meet on Friday, May 26, to determine if it will advance the cash to Kenya.
Should World Bank fail to approve the disbursement, the country will be staring at an imminent financial crisis that will see the government struggle to clear pending bills and undertake development projects.
Reforms attached to the loan are the strengthening of domestic revenue mobilisation with a key focus on the budding digital economy.
The government is optimistic that the taxes proposed in the Financial Bill 2023 will be able to service the loan.
World Bank had proposed to advance a Ksh103 billion but the government, through Treasury Cabinet Secretary Njuguna Ndung’u, negotiated for an extra Ksh23 billion on December 2022.
While requesting the loan, CS Ndung’u noted that it would be under concessional terms and would help the government manage its public debt.
“The loan under discussion with the World Bank aims at promoting sustainable, resilient, and inclusive growth,” Ndung’u stated at the time.
On why Kenya needed the cash, the CS noted, “Kenya, like other economies in the region, continues to carry the effects of multiple and persistent shocks.”
“This has created supply constraints and the outcome is rising inflation and cost of living in general,” he added.
The World Bank has already committed in principle to advance the loan to the Ruto-led government.
"The program development objective is to enhance sustainable, inclusive, and green growth by creating fiscal space in a sustainable and equitable manner and increasing competitiveness to boost exports in agriculture," World Bank stated in March 2023.
President William Ruto had earlier promised that the country would limit foreign borrowing and prioritise raising revenue through taxation.
"When I came in, we said we have to reduce on borrowings. We have now cut down Ksh300 billion and we are going to continue reducing it every year until that time when our budget is sustained by our own taxes," the President promised on January 29, 2023.
