In an effort to help accelerate Kenya’s ongoing inclusive and resilient recovery from the COVID-19 crisis, the World Bank has approved a $750 million Development Policy Operation (DPO) that will help strengthen fiscal sustainability through reforms that contribute to greater transparency and the fight against corruption.
The DPO is the second in a two-pronged series of development operations launched in 2020 that provides low-cost budget financing as well as support for key policy and institutional reforms. The DPD organizes multi-sectoral reforms into three pillars: (1) fiscal and debt reforms to make spending more transparent and efficient, and improve the performance of the domestic debt market; (2) power sector reforms and public-private partnerships (PPPs) to put Kenya on a green and efficient energy path and stimulate private investment in infrastructure; and (3) strengthening Kenya’s natural and human capital governance framework which includes environment, land, water and health care.
For example, among the budget management reforms supported, public procurement to a new electronic platform makes transactions more transparent and reduces opportunities for corruption. By the end of 2023, the program aims for five strategically selected ministries, departments and agencies to procure all goods and services through the e-procurement platform.
“The Government of Kenya has maintained momentum to advance critical reforms despite the disruptions caused by the pandemic,” said Keith Hansen, World Bank Country Director for Kenya. “The World Bank, through the DPO instrument, is pleased to support these efforts that position Kenya to sustain its strong economic growth and steer it towards inclusive and green development.”
In the infrastructure sector, the measures will create a platform for investments in clean energy technologies at lower costs and improve the legal and institutional framework for PPPs in order to attract more private investment. Aligning clean energy investments with demand growth and ensuring competitive prices through a transparent and competitive auction system could generate savings of approximately $1.1 billion over ten years at current exchange rates.
Building on the reforms supported by the previous operation, Kenyans will also benefit from better management of natural and human capital. Ongoing reforms will help modernize the land market and improve transparency by updating the Scoring Act and the Scoring for Assessment Act to align the legal framework with decentralization and provide counties with the legislative framework to review and update their assessment rolls. This political operation will also strengthen the overall management of the environment (including mitigation and adaptation to climate change) and water resources. For example, six river basins have been identified and classified to enable integrated management and allocation of water sources at the basin level. The DPO is also supporting Kenya’s ability to manage future pandemics through the establishment of the National Public Health Institute of Kenya (NPHI), which will coordinate public health functions and programs to prevent, detect and respond to threats to public health, including infectious and non-infectious threats. diseases and other health problems.
“Government reforms supported by the DPO are helping to reduce fiscal pressures by making public spending more efficient and transparent, and reducing fiscal costs and risks for key public entities,” said Alex Sienaert, Senior Economist for the Bank. world in Kenya. “Furthermore, strong and sustainable growth is essential to achieve medium-term fiscal consolidation and to reduce the debt burden and related risks. The package includes measures to further boost private investment and growth, while strengthening the management of Kenya’s natural and human capital that sustain its economy.”
DPOs are used by the World Bank to support a client country’s ambitious policy and institutional reform agenda to help accelerate inclusive growth and poverty reduction. The Bank approves approximately 40-50 DPOs worldwide each year. The reforms have been made even more critical by the negative impacts of the COVID-19 crisis, and to create the conditions for Kenya to recover from it. The financing provided by the World Bank is offered on concessional terms, which makes it significantly inferior to commercial loans. The total annual interest cost of the Kenya DPO is around 3.0%.
*About the World Bank. The World Bank provides financing, global knowledge, and long-term commitment to help low- and middle-income countries end poverty, achieve sustainable growth, and invest in opportunity for all. We include the International Bank for Reconstruction and Development (IBRD), the world’s largest development bank, and the International Development Association (IDA), one of the largest sources of financing for the poorest countries of the world. Together with the other institutions of the World Bank Group as well as public and private sector partners, we are helping to shape solutions to the global challenges of the 21st century in all major development sectors. A world where no one lives in poverty and where everyone has the opportunity to have a better life is within our reach.
PRESS RELEASE No.: 2022/057/AFE