Business Edge | Kenya Engages World Bank For $200m Loan Facility

Kenya Engages World Bank for $200M Facility

The issue of drought and food security is a national conversation in Kenya and recently, the country was offered a two hundred million dollar loan facility by the World Bank to develop various projects specifically in the country’s agricultural sector. As the economic powerhouse in the East African region, agriculture is extremely important in and to Kenya.  Agriculture directly contributes 26% to Kenya’s GDP, another 27% through linkages with other sectors and employs 40% of the population. Professor X N Iraki of the Faculty of Business and Management Science at the University of Nairobi returns to Business Edge with Tolulope Adeleru-Balogun to discuss the implication of this loan, its importance and how best Kenya can utilize it for its agricultural projects.

In the last five years, debt has been a very big debate [in Kenya],” Professor Iraki says. “Not just from the World Bank, but other lenders like China.” He adds also that as the country moves closer to its 2022 general election polls, the debate around Kenya’s internal and external debts will continue to intensify.

The loan numbers make for an interesting look: in April 2020 and May 2020, Kenya got fifty million dollars one billion dollars from the World Bank each month; seven hundred and fifty million dollars in June 2021 and one hundred and fifty million dollars in October 2021. These funds went towards helping the country combat COVID, financing budget shortfalls, as well as to assist in recovery from the pandemic. While these loans sound high, it is early to determine if they’ve been put to successful use- it may take a few years to grow crops, harvest and then export.

Nevertheless, it is clear that Kenya needs intervention in combating food insecurity, with 1.3 million people classified as in crisis, emergency or catastrophe. According to Professor Iraki, the loan is welcome but is not sufficient to solve the pressing issues. “The food insecurity in Kenya was not just caused by COVID19; even before that, there were other causes such as drought… and land fragmentation.”

As it stands now, Kenya is faced with only one of two choices to raise revenue for its agricultural projects: borrow these types of loans or raise taxes. Raising taxes especially in an election year will sure put more political pressure on the citizenry, leaving it no choice but to take more debt to its already heavy 7 trillion shillings ($64 billion).

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