Kenya Seeks Ksh127 Billion Loan From World Bank and AfDB to Cut Deficit

Kenya has opened talks with the World Bank and African Development Bank for a Ksh127 billion loan. The government aims to reduce its growing budget deficit through this additional external financing.

This latest move follows stalled talks with the International Monetary Fund for a new funding programme. Kenya's previous IMF arrangement worth Ksh466 billion ended last year without renewal agreement.

World Bank and AfDB Commitments
The World Bank will provide Ksh94 billion under its Development Policy Operations programme structure. The African Development Bank is contributing Ksh34 billion through a policy-based loan arrangement.

Treasury's Public Debt Management Director General Raphael Owino said both facilities will be released before financial year-end. The two institutions expect to disburse funds before June 2027 closes the current fiscal cycle.

Reforms Required for World Bank Tranche
Kenya is already discussing required reforms with the World Bank before receiving the Ksh94 billion. The proposed reforms aim to strengthen public financial management and government programme oversight.

Reforms include disclosure of officials' private interests and tighter public-private partnership rules. Whistleblower protection and amendments to the Public Finance Management Act are also proposed conditions.

Fiscal Deficit Widens Significantly
Kenya continues struggling with a widening fiscal deficit requiring urgent financing action. Treasury projections show the gap rising to Ksh1.288 trillion in the 2026/2027 financial year.

Higher domestic debt interest payments and lower projected revenues drive the deficit increase. The government faces mounting pressure to secure additional financing for essential expenditure commitments.

Multiple External Financing Options Pursued
Kenya is pursuing other external financing options beyond World Bank and AfDB support. The government plans a debut panda bond in China and Japanese Samurai bonds issuance.

President Ruto's administration has formally requested a new IMF programme amid ongoing uncertainty. Talks have stalled, leaving any proposed agreement uncertain for the current budget cycle.

IMF Transition Delays New Agreement Timeline
A transition within the IMF's Kenya team has delayed critical consultations on new financing. The IMF requested a transitional period, which Kenya granted to allow staff changeover.

Owino said a new IMF mission should arrive towards late November or early December. A new financing agreement remains unlikely in the current budget cycle due to timing delays.