World Bank Delays Ksh 97 Billion Kenya Loan

Kenya is facing mounting financial pressure after the World Bank delayed the release of a Ksh 96.9 billion ($750 million) budget support loan, citing pending reforms that the government must complete before the funds can be disbursed.

The delay comes at a time when the government is grappling with a Ksh 1.22 trillion budget deficit, reduced revenue following fuel VAT cuts, and supply disruptions linked to tensions in the Middle East.

The loan, offered under the Development Policy Operations (DPO) programme, is intended to provide direct budget support to the National Treasury to help finance salaries and routine government operations in the upcoming budget cycle.

World Bank Conditions Kenya Must Meet

According to the World Bank, Kenya must first meet three key regulatory requirements before the funds can be released.

These include:

• Establishing clear rules on how beneficiaries of government cash stipends for orphans, the elderly, and persons living with disabilities are identified
• Putting in place regulations governing sustainability-linked bonds
• Passing legal amendments aimed at increasing Kenya’s national tree cover to at least 30% by 2032 under the Forest Conservation and Management Act.

The conditions were set after Kenya sought additional financial assistance to cushion the economy from fuel supply disruptions and external shocks linked to tensions in the Middle East.

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Treasury and Parliament Face Tight Timelines 

With less than two months to the initial June 30 deadline, attention has shifted to Parliament and the Executive to fast-track the remaining reforms.

Treasury officials say two of the conditions are expected to be completed by the end of May, while the forest conservation amendments are scheduled for completion by May 5.

Once the legal and regulatory requirements are met, Kenya will also require a clearance letter from the International Monetary Fund (IMF) before the World Bank can proceed with disbursement.

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A Treasury official said the government is working within the agreed timelines to ensure the funds are released without further delay.

“We are working to meet the remaining requirements within the agreed timelines so that the funds can be released without further delay,” the official said.

The national budget for the coming financial year is projected at about Ksh 4.738 trillion, with a national government expenditure ceiling of Ksh 2.878 trillion, making the delayed funding particularly sensitive for Treasury planning.

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National Treasury Office in Nairobi. PHOTO /Standard