By Mercy Imali
Kenya has reached out to the World Bank for an urgent loan in the form of budgetary support. Alarm bells had been sounded recently over Kenya’s rapidly deteriorating cash-flow situation that has been characterized by falling revenues and worsening debt service obligations.
The World Bank’s board is set to make a decision on whether or not to approve the KSh 75 billion application, described as Inclusive Growth and Fiscal Management Development Policy Financing.
The type of credit Kenya seeks is a quick-disbursing facility where cash flows straight into the budget to top up the public purse.
Under the regime of former President Mwai Kibaki, Kenya kept away from this type of credit. It instead opted for project support.
The loan application is contained in a letter to the President of the World Bank, Ms Kristalina Georgieva, by Treasury Cabinet Secretary Henry Rotich, dated March 13th 2019. He states the money will fund the Big Four agenda.
Noteworthy is that budget support is not tied to specific projects and can be used to fund politically-important activities. The cash could also be vulnerable to misappropriation.
The proposed funding is facing fierce opposition from some countries with representation on the bank’s board. Critical voices say that in the context of weak financial public management systems and challenges, for instance “Eurobond” that type of loan is hardly suitable for Kenya.
In his letter, Mr Rotich cites recent high-profile measures that the government has taken to fight corruption. They include the arrests and prosecution of government officials and business people.
Should the loan be approved, experts warn that it poses a really massive systemic risk.