The World Bank has put on hold the disbursement of $750 million (Sh96.9 billion) to Kenya, citing the need for additional reforms to ensure the country’s debt remains sustainable.
The Treasury says it is still reviewing further steps to trim the budget deficit, a delay that has stalled the release of the loan.
He added that the review is now complete and discussions are ongoing to agree on further measures to support medium-term fiscal consolidation.
The lender had previously urged Kenya to consider introducing additional consumption taxes, such as excise duties.
However, it did not clarify if it is seeking increased excise and VAT rates on specific goods or a wider range of products to be taxed.
The hold comes after previous delays due to Kenya’s failure to pass key legislation, including the Conflict of Interest Bill and the Social Protection Bill, which were conditions for the loan.
Loan Suspended
Earlier, the World Bank suspended the release of a Ksh97 billion loan to Kenya.
The bank highlighted delays in key reforms, including the long-awaited Conflict of Interest Bill, which aims to tackle corruption among public officials and politicians.
“Development policy operations are contingent on the completion of prior actions and a sound macroeconomic and fiscal policy framework,” said Qimiao Fan, the Bank’s director for Kenya, Rwanda, Somalia, and Uganda.
He added that the timing of the next tranche will depend on the government fulfilling its reform commitments.
“We are continuing to prepare the second operation, and the timing of its presentation to our board depends on the government fulfilling the agreed prior actions and maintaining a sound macroeconomic policy framework,” he added.
Kenya was poised to receive a delayed Ksh97 billion ($743 million) loan from the World Bank after President William Ruto signed the Conflict of Interest Bill into law on Wednesday, July 30.
“The principal object of the Bill is to consolidate the laws relating to conflict of interest and establish a framework for managing conflicts of interest in the discharge of public duties. The Bill contains various measures to ensure compliance, including recusal of a public officer from a discussion or decision, and declaration of income, assets, and liabilities,” read part of the Bill.
Also Read: World Bank Clarifies Issuing Loans to Kenya in Secret
World Bank Demands Reforms Before Releasing Ksh97 Billion to Kenya
The funding, originally expected in July under the Development Policy Operations (DPO) programme, is linked to the government’s meeting specific reform milestones aimed at improving governance.
Besides the Conflict of Interest Bill, Kenya had committed to consolidating public finances under a single treasury account and automating government procurement to reduce bid-rigging, insider dealings, and collusion in state contracts.
The Treasury had factored in the World Bank funds in this financial year but will now face a budget deficit without the loan, potentially forcing higher taxes or spending cuts.
The World Bank’s release of the funds depends on Kenya completing all “prior actions” under the DPO framework, which resulted in Sh155 billion ($1.2 billion) being disbursed last year.
The Treasury had anticipated the loan’s release following the National Assembly’s passage of an amended Conflict of Interest Bill, intended to strengthen transparency, accountability, and anti-corruption measures in the public sector.
Also Read: Mbadi Holds Talks with World Bank and IMF as Ruto Flies to China
How the Loan Was Tied to the Bill
The delay in passing the legislation had led the World Bank to withhold the disbursement of $743.12 million (Ksh96 billion), forcing the Treasury to revise the national budget for a third time in the current financial year.
According to the National Treasury, several ministries were already running low on funds, raising concerns over halted services and potential salary delays.
Treasury CS John Mbadi had said in June, “The World Bank funding seems to be going to July because some of the legislations (Conflict of Interest Bill) that were precedent to the release of these funds were delayed.”
“The Conflict-of-Interest Bill was a key Bill for the WB to give us the funding, and when it was unlocked, there was no time to take it to the WB board for approval.”
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