World Bank prepares $750 million loan to support Kenya’s fiscal reforms

The World Bank is moving to finalize a $750 million funding package for Kenya to help the government shore up its finances and navigate a series of economic pressures. The loan, part of a multi-year effort to stabilize the nation’s budget, is set for a final review and expected board approval on June 26, 2026.

This financing follows a larger $1.2 billion injection approved in May 2024 and marks the second phase of a three-part program. Managed through the National Treasury, the money is tied to specific policy changes. These include efforts to make public spending more transparent and to help the country manage the rising costs of climate change.

High rates amplify Kenya debt pressures

Kenya’s economy grew steadily last year, with GDP per capita reaching $2,371. However, the data shows that much of this progress came from heavy spending rather than actual gains in efficiency. Extreme weather has hit the agricultural sector hard. Poor rains late last year wiped out nearly all crops in several regions, leaving about 3.5 million people in need of food aid.

The government is also grappling with a heavy debt load that has more than doubled over the last 15 years. While public debt dipped slightly to 68.8 percent of GDP this fiscal year, the World Bank says higher global interest rates and the lingering effects of the pandemic have made it much more expensive for Kenya to borrow money on the open market.

Corruption and a lack of oversight remain major hurdles for the administration in Nairobi. Kenya is currently on a “grey list” by international financial watchdogs, which makes it harder to attract investment. World Bank officials expressed that cleaning up public procurement and tightening accountability will be vital as the country prepares for the 2027 general elections.

World Bank flags Kenyan reform risks

Beyond the budget, the program pushes for a digital overhaul of business licensing and better access to technical training for workers. It also addresses the Shirika Plan, a massive initiative to integrate more than 800,000 refugees into the local economy. On the environmental front, the funds will support new rules for green transport and forest restoration.

The World Bank described the risks to this plan as “substantial.” Political pressure and social tension over the cost of living could make it difficult for the government to stick to its promises. Success depends largely on how well Kenya coordinates with the International Monetary Fund, which is currently negotiating a fresh deal with the government after a previous program.