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(Bloomberg) — The World Bank approved a long-awaited $750 million loan to Kenya in support of reforms aimed at enhancing good governance and improving public-finance management.
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The Washington-based lender will also help Kenya issue a $500 million sustainability-linked loan for reforestation efforts and improved energy access, according to an emailed statement.
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The so-called development policy operation loan, or DPO, is meant to help ease the nation’s debt pressures, tackle corruption, establish the regulatory certainty required to create jobs, attract private investment and lift people out of poverty, the bank said.
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“This operation will help Kenya reduce leakage, generate fiscal savings, and ensure that public resources deliver better results and reach the people who need them most,” said Qimiao Fan, the World Bank division director for Kenya. “It is critical for the Kenyan government to stay on the path of these reforms to ensure fiscal and debt sustainability.”
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Kenya will have more flexibility in spending proceeds of the planned sustainability-linked syndicated loan, compared to green bonds, the lender said. However, financing costs will be tied to performance, where meeting targets lowers the interest rate and vice versa.
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It will be backed by a World Bank credit enhancement tool that reduces investor risk, while lowering Kenya’s borrowing cost. The bond will also help the nation retire expensive debt and provide budget financing on better terms than Kenya can currently access commercially, the World Bank said.
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Kenya’s economy is projected to grow 4.3% in 2026 and about 4.4% over the medium term. The war in Iran has fueled a surge in energy prices that’s weighing on private investment and household purchasing power, it said.
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