The release of Kenya’s Sh96.9B World Bank loan has been frozen pending the enactment of seven key laws and four policy actions, raising concerns over the country’s fiscal planning for the 2025/26 financial year. The halt comes under a three-year Development Policy Operation (DPO) agreement signed in June 2024, following an initial Sh155 billion ($1.2 billion) disbursement. Originally expected before June 2025, the Sh96.9 billion ($750 million) tranche is now on hold as the World Bank seeks concrete reforms in governance, market regulation, environmental protection, and public financial management.
The World Bank’s conditions for the Sh96.9B loan are designed to address structural weaknesses in Kenya’s economy and public sector operations. These measures are not simply formalities but target operational gaps that could hinder transparency and sustainable development. Kenya had previously passed the Conflict of Interest Act and Social Protection Act earlier this year, which unlocked partial funding. However, the Bank has stressed that full implementation, including supporting regulations and amendments, is essential.
The Seven Laws: Bridging Legislation to Enforcement
The first requirement involves seven laws meant to translate policy into enforceable action:
- Regulations to Operationalize the Conflict of Interest Act: These regulations aim to prevent public officials with private business interests from influencing procurement processes. They mandate disclosure of conflicts and recusal protocols to dismantle entrenched networks of cronyism.
- Regulations to Operationalize the Social Protection Act: These rules focus on creating an Enhanced Single Registry (ESR) for cash transfers, ensuring funds reach eligible beneficiaries while reducing duplication and leakage.
- Regulations for the County Licensing (Uniform Procedures) Law: Standardized licensing rules across all counties would simplify business operations, especially for small enterprises navigating differing county regulations.
- Amendments to the Competition Act: The changes would empower the Competition Authority to regulate dominant firms, particularly in telecommunications and retail, to promote fair competition and prevent price manipulation.
- Updated Kenya Information and Communications Regulations: The overhaul seeks to provide refugees easier access to SIM cards and mobile money services like M-Pesa, while maintaining verification and security safeguards.
- Amendments to the Forest Conservation and Management Act: The revisions strengthen forest protection, impose tougher penalties for illegal logging, and provide clearer guidance for community-led conservation initiatives.
- Sovereign Sustainability-Linked Financing Framework: This framework supports the issuance of green and sustainability bonds, linking debt proceeds to measurable environmental and social outcomes, and attracting investors interested in climate-resilient projects.
The Four Policy Actions: Immediate Steps to Operationalize Reform
Alongside the seven laws, four policy actions are required to ensure the reforms are actionable and enforceable:
- Full Rollout of the Treasury Single Account (TSA): Consolidating government funds at the Central Bank of Kenya aims to optimize interest income, improve real-time cash management, and reduce opportunities for corruption.
- Complete Implementation of e-Government Procurement: Mandating digital procurement platforms would enhance transparency, automate audits, and reduce leakages of the annual procurement budget.
- Urban Transport Policy to Promote Rail Usage: Designed to reduce congestion in cities like Nairobi, this policy includes incentives, infrastructure upgrades, and integrated ticketing to encourage commuters to use rail and public transit, while lowering emissions.
- Expedited Approval Framework for County Additional Allocations Bills: Accelerating parliamentary vetting of supplemental county budgets would prevent delays in resource flows to devolved units, ensuring timely delivery of services like health, education, and social welfare.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.