Kenya is eyeing the injection of $1.2 billion (Sh160 billion) in cheap loans from the World Bank.
If approved, the money could support the shilling in the coming months from a drastic slide when the government makes the biannual repayment of loans taken to construct the Standard Gauge Railway (SGR) from China this July as well as the final payment for the 2014 Eurobond in June, which was partially offset in February this year.
The government has reported to the World Bank that it has concluded implementing reforms under the sixth Development Policy Operation (DPO6).
Official sources said this reform package has been taken to the World Bank Board for consideration.
The DPO6 programme of reforms is a set of requirements that Kenya is expected to meet to receive World Bank support.
The measures are meant to enhance fiscal sustainability and resilient growth.
Among the areas of focus for Kenya are promoting efficiency and transparency in financial accountability, fostering more competitive and inclusive product and labour markets by putting competitive business regulations in place and recognising prior learning.
The government must also strengthen climate action through activities such as enhancing forest cover for climate mitigation and adaptation and leveraging private capital.
It noted that it has met all the conditions, including moving towards implementation of the Treasury Single Account (TSA), plans to offload some of the State-owned enterprises as well as improving the doing business environment in the country.
“Most of the reforms have been approved by Cabinet or enacted into law by Parliament, including the Treasury Single Account,” said a Treasury source, who sought anonymity as they are not authorised to speak to the media.
The National Treasury recently started the implementation of the TSA in the government's bid to consolidate and improve oversight of its cash resources.
This is after the implementation of the TSA for the national and county governments as well as government agencies got the Cabinet approval in January this year. The move is expected to simplify banking by different government agencies.
Other areas of reform include lowering the cost of living, which has dropped to five per cent in April 2024. This is within the Central Bank’s target, going down from 9.6 per cent in September 2022.
The drop in the cost of living has largely been due to the favourable weather, with the short rains towards the end of last year and the enhanced rains during this year’s long rain season helping bring down the cost of many food items.
The drop in fuel price has also played a factor by bringing down the cost of transportation as well as reducing the cost of production for manufacturers who depend on fuel for their processes.
The government has also reported that the shilling has strengthened from Sh134 to the dollar from Sh162 in January this year.
Analysts have grappled to understand the fundamentals behind the strengthening of the local currency and noted that it will face a major test in July when the government makes repayment for SGR loans.
Repayments for the Chinese loans are done biannually in January and July and are usually a drain on the country’s foreign exchange reserves.
The government will also be making the final payment for the $2 billion (Sh268 billion) Eurobond taken in 2014. It paid $1.44 billion (Sh192.9 billion) in February this year using proceeds from a freshly issued Eurobond.
