By Benadeta Mwaura - Reporter
Kenya, June 30, 2026 - The World Bank has approved a $750 million (about KSh97 billion) budget support loan for Kenya, providing the government with fresh financing aimed at supporting economic reforms, strengthening governance and easing pressure on costly domestic borrowing.
The financing package, approved by the Bank's Board on Tuesday, also includes a sustainability-linked financing facility, making Kenya one of the few African countries to access funding tied to the implementation of governance and sustainability reforms.
According to the World Bank, the operation is intended to help Kenya reduce its reliance on expensive domestic debt while advancing reforms in public financial management, transparency, social protection and fiscal sustainability.
The latest approval comes as President William Ruto's administration continues implementing a broad economic reform programme aimed at stabilising public finances, reducing the budget deficit and restoring investor confidence following several years of rising debt servicing costs.
The budget support loan is expected to provide additional fiscal space for the Treasury as Kenya seeks to lower borrowing costs and improve debt management.
Unlike project-specific loans that finance individual infrastructure developments, budget support financing is disbursed directly to the national Treasury and can be used to support government expenditure while agreed policy reforms are implemented.
The sustainability-linked component ties part of the financing to Kenya's progress in implementing agreed reforms. These include strengthening public financial management, improving governance, expanding social protection programmes and enhancing transparency in public procurement and service delivery.
The approval comes at a critical time for Kenya's economy. The government has been pursuing fiscal consolidation following last year's withdrawal of the Finance Bill 2024, while simultaneously seeking alternative financing sources after ending its previous programme with the International Monetary Fund (IMF) earlier this year.
At the same time, the Treasury has introduced a series of reforms intended to improve revenue collection and expenditure management, including the rollout of fully digital government procurement, expansion of electronic tax administration by the Kenya Revenue Authority (KRA) and implementation of the Treasury Single Account (TSA) framework to improve cash management across government institutions.
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Kenya has also been restructuring parts of its debt portfolio to reduce financing costs. Earlier this month, the government converted portions of its Chinese railway loans from U.S. dollars to Chinese yuan, a move expected to lower annual debt servicing costs while reducing exposure to exchange rate volatility.
The World Bank noted that the latest financing will support reforms designed to strengthen governance, improve the management of public resources and expand social protection for vulnerable households.
The loan is likely to improve Kenya's short-term liquidity position by providing relatively affordable financing compared to domestic borrowing through Treasury bills and bonds, where interest rates have remained elevated.
The approval also signals continued confidence by multilateral lenders in Kenya's reform agenda despite concerns over the country's public debt, which has risen sharply over the past decade.
Economists note that concessional financing from institutions such as the World Bank generally carries lower interest rates and longer repayment periods than commercial borrowing, making it a preferred funding source for governments undertaking structural reforms.
The new facility follows a $1.2 billion World Bank budget support programme approved in 2024, which was designed to help Kenya address fiscal pressures while advancing green growth and economic reforms.