The World Bank has today approved Ksh106 billion budget support operation for Kenya, to help close the fiscal financing gap, while supporting reforms that help advance the government’s inclusive growth agenda, including in affordable housing and support to farmers’ incomes.
The Kenya Inclusive Growth and Fiscal Management Development Policy Financing (DPF), is the second of a two-operation programmatic series aimed at recreating fiscal buffers over the medium term and crowding in private investment. Preparation of this DPF preceded the COVID-19 pandemic, but its approval is timely since it will help to fill the financing gap generated by the severe, ongoing shock to Kenya’s economy. The DPF thus complements the recently approved Kenya Covid-19 Emergency Response Project which seeks to prevent, detect, and respond to the COVID-19 outbreak and strengthen national systems for public health emergency preparedness.
“COVID-19 represents an unprecedented shock to the global economy. The World Bank remains very committed to supporting our client countries in these very challenging times. This operation provides concessional resources to help Kenya navigate the current COVID-19 crisis and to cushion the impact on livelihoods and jobs while supporting the continued operation of essential public services,” said World Bank Country Director for Kenya, Felipe Jaramillo.
To secure the financing, Kenya has undertaken policy reforms that directly benefit many low-income Kenyan households. Smallholder farmers will now benefit from better targeting of subsidized agricultural inputs through electronic vouchers. The supply of affordable housing is expected to increase, on the back of the updating of antiquated legislation that hindered the development of the housing market.
Given Kenya’s classification as a lower-middle-income blend country, the $1 billion financing comprised a $750 million credit from the International Development Association (IDA) and a further $250 million loan from the International Bank for Reconstruction and Development (IBRD).