Kenya is standing in line to secure another Ksh136.6 billion ($1 billion) loan from the World Bank as it seeks funds to ease the cash flow crisis and boost its dwindling foreign exchange reserves that have taken a hit from the weakening shilling.
The board of the World Bank Group is scheduled to meet on May 26 to approve the $1 billion to Kenya through its Development Policy Operation (DPO) framework.
DPOs are provided in the form of non-earmarked loans, credits, or grants that support the country’s economic and sectoral policies and institutions.
If approved, the Bretton Woods lender will be expected to wire the billions to the exchequer in a month given that the financing has been budgeted for the financial year 2022/23 ending on June 30.
Among the reforms attached to the proposed funding is the strengthening of domestic revenue mobilisation with a focus on the budding digital economy.
The recently published Finance Bill has proposed the introduction of a Digital Assets Tax at 3.0 percent targeting cryptocurrency and non-fungible tokens.
“Reforms will build on recent improvements in domestic revenue mobilisation by pursuing measures to broaden the tax base given the changing structure of the economy such as taxation of an increasingly digitised economy, capturing of advances in the use of financial derivatives, and ensuring compliance by multinational companies by reducing base erosion and profit shifting,” the programme document states.
The World Bank had initially indicated the potential loan to Kenya was $750 million (Ksh102.5 billion) before the ticket size was upsized to $1.0 billion in March 2023 with the programme’s theme changed from the previous ‘Strengthening Economic Management for Resilient and Inclusive Growth’ to ‘Fiscal Sustainability and Inclusive Green Growth Development Policy Operation’.
Unlike the earlier plan, the financing is now expected to place a special focus on climate change mitigation and adaptation.
It comes against the backdrop of the Treasury having published the draft version of the National Green Fiscal Incentives Policy Framework.
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