Revealed: Strict rules for new £158 billion World Bank loan

These two conditions constitute the core of the conditions that must be met before any further spending under World Bank development policy operations.

Sanctions imposed on state-owned enterprises, ministries and districts for incorrect payment of allowances are expected to reduce the country’s wage bill to the desired level of no more than 35 percent of tax revenues.

“Public sector salaries, including allowances, are subject to complex rules and regulations at central government level, many of which are not enforced, leading to repeated breaches of salary caps,” the World Bank noted, without disclosing further details on sanctions.

The state, through the Salaries and Remuneration Commission (SRC), has recently cracked down on perks, eliminating money paid for serving on internal committees and task forces.

Despite a decline in recent years, the wage bill is still estimated at 40.45 percent of revenues for the financial year ending June 30, 5.45 percentage points above target.

Other conditions for ring-fencing public financial management include the adoption and use of a treasury single account (TSA), the creation of a public sector payroll management policy, the issuance of standardized pay numbers for all public officials, and the elimination of manual payrolls.

Meanwhile, the multilateral lender estimates that refugees in the country now make up about one percent of the total population, warranting a greater share of the economy.

“Refugees constitute almost one percent of Kenya’s population, but their potential contributions to the economy – from skills to greater labor market contestation – remain untapped,” it said.

As part of the enabling conditions for the disbursement of P157.8 billion, the World Bank noted that the Ministry of Home Affairs has issued the General Refugee Regulations 2024, providing for the treatment and care of refugees and the procedures for applying for refugee status.

The ministry has issued a legal notice specifying refugee identification documents for access to government-provided services.

By next year, when Kenya is due to make the second of three disbursements under World Bank development policy financing/operations, the Ministry of Home Affairs is expected to simplify procedures for issuing Class M work permits, which enable refugees to take up employment.

The ICT ministry is expected to include refugees’ identification documents as part of SIM card registration requirements, which will enable immigrants to transact on mobile services such as M-Pesa and make calls.

Further funding conditions generally include strengthening climate action, including the promotion of urban public transport and electromobility, including the adoption of policies to support this transition.

The new financing of Sh157.8 billion ($1.2 billion) includes a loan of Sh111.7 billion ($850 million), a proposed credit facility of Sh39.4 billion ($300 million) and a grant of .5 billion ($50 million), realized at an exchange rate of Sh131.5.

The new disbursement is expected to ease current funding constraints on the government, while laying the foundations for green projects and inclusive economic growth in the medium term.

“The program is tailored to Kenya’s challenging macroeconomic environment of tight global and domestic credit conditions, fiscal pressures, climate change shocks, and persistent poverty and inequality,” the World Bank added.

The multi-year program is expected to help the government reduce the twin deficits of the budget deficit and the current account deficit, strengthen the sustainability of fiscal and external debt, and seize opportunities for fiscal consolidation by increasing budget efficiency and transparency.

The funding will immediately free up resources to oversee the implementation of the 2023/24 budget through June.

Financing from the IMF and World Bank is expected to provide crucial foreign currency inflows while reducing the need for external commercial loans such as Eurobonds.