The government’s plans to cushion Kenyans from rising fuel prices have suffered a setback after the World Bank delayed approval of a proposed KSh78 billion emergency loan, citing the need for more information on how the funds will be spent.
Kenya applied for the financing in April through the World Bank’s Rapid Response Option, an emergency facility designed to help countries respond to crises such as conflicts, pandemics and natural disasters.
The funds were expected to help the country manage the economic effects of global tensions, particularly the rising cost of imported fuel and fertiliser, which continue to put pressure on households, businesses and the wider economy.
However, the Washington-based lender has asked the government to provide a detailed breakdown of the emergency expenditures the loan will finance before the funds can be approved.
The request means the National Treasury will have to submit a clearer spending plan as it seeks financial support to cushion the economy against disruptions linked to ongoing global conflicts, including tensions involving the United States, Israel and Iran.
Pressure Mounts as Fuel Costs Remain High
Kenya, like most economies whose energy comes through imports, has experienced increased energy costs due to the instabilities in the international market.
Despite the introduction by the government of various taxes cuts on energy commodities as a means of helping citizens cope with the increased costs, fuel costs continue to rise.
The proposal for KSh78 billion would have helped the government to cushion itself from these shocks, especially in agriculture.
With the funds now delayed, pressure is mounting on the government to demonstrate exactly how the emergency financing will be utilised before the World Bank gives the green light.
Fresh Request Comes Weeks After KSh97 Billion Approval
The latest announcement follows just two weeks after the World Bank had approved yet another funding package worth KSh97 billion for Kenya’s economic reform program.
The funding package, which was unveiled on June 29, included a KSh44 billion loan from the International Bank for Reconstruction and Development (IBRD) and KSh53 billion of concessional financing from the International Development Association (IDA).
From the World Bank, the fund will be used to enhance governance, public financial management, and social protection programs, among other areas including the fight against corruption.
The money will also be partly used to improve the welfare of refugees and the communities hosting them.
From the World Bank’s point of view, the funds are meant to assist the country to enhance governance and fiscal management while creating an enabling regulatory environment that will attract private investors, create employment, and lift people out of poverty.
As the government waits for the separate KSh78 billion emergency funding package to be approved, all eyes will now be fixed on how fast the country will provide the additional information needed by the lender to access the money.