Kenya is set to obtain around $400 million in emergency financing from the World Bank within the next six weeks amid the threat from various challenges facing the nation, a source close to the discussions said. The financing is being arranged through the World Bank’s Rapid Response Option (RRO), which allows nations to divert up to 10 percent of their undisbursed World Bank funding for emergencies.
The funding request was initially made because the conflict between Iran and other nations raised global crude oil prices, increasing Kenya’s import bill and straining its finances. However, the funding proposal now covers more areas, like the threat from the regional Ebola outbreak and the upcoming El Niño challenge.
Reasons Why Kenya Needs the Emergency Funding
Kenya requested access to the facility from the World Bank when oil prices went up, thus putting more pressure on the country’s economy. The country depends heavily on imported fuel; therefore, sustained high oil prices will increase the cost of transport and electricity, as well as strain the country’s budget.
According to the World Bank, it is currently assisting Kenya to develop a framework that would allow speedy access to funding in case of any qualifying emergency, including those associated with the Middle East crisis and El Niño.
The amount has not been finalized yet. According to the RRO, a country has up to 10% of its undisbursed Bank financing for reprogramming, and Kenya’s amount would depend on how much balance Kenya would have at the time its emergency framework would be complete.
Ebola Poses Another Health Threat
Another worry relates to the Bundibugyo virus that is currently being experienced in the Democratic Republic of Congo.
This has become the biggest Ebola outbreak that the Democratic Republic of Congo has seen before, with WHO reporting about 6,757 confirmed cases of the virus and 3,267 deaths so far on September 7. The virus has affected 61 health zones of six provinces. Uganda, which shares a boundary with Kenya, had experienced an outbreak earlier, which, however, ended on August 26.
There have been no cases of the Bundibugyo virus in Kenya, but people cross the western boundary of Kenya in thousands every day. According to WHO, Kenya is enhancing its preparedness capacity at its busiest land border point, which includes taking steps for detection and response to imported cases.
El Niño May Affect Agriculture and Water Resources
Emergency financing may also help Kenya prepare for the disruptions related to El Niño in agriculture and water resources.
Kenya suffered one of the worst effects of El Niño in 1997, with continuous rainfall causing destruction of crops, damage to roads and homes. Another bout of bad weather conditions would cause more strain on farmers and on infrastructure and water supply.
For a nation that is already under financial stress, emergency funding would help provide additional financial resources that would not immediately come out of existing development programs.
Uses of the $400 Million
This funding can be used in three broad categories: preparation for a health emergency, climate-related agricultural and water needs, and economic protection against high energy costs.
Both sides have agreed on the Contingency Emergency Response Project (CERP), which will lay out the terms on how the funds will be accessed. The World Bank says the toolkit that it has created will enable rapid access to financing for the country in case of disasters or other emergencies.
The World Bank has an extensive portfolio in Kenya, making the country a major beneficiary of undisbursed funds.
Financial Pressures on the Kenyan Government Increase
This emergency loan application comes at a time when Kenya is under growing pressures due to debt repayments and fiscal constraints. The Kenyan government has been seeking alternative means of financing amid efforts to safeguard funding of its developmental projects and essential services.
The World Bank had approved $750 million worth of development-policy financing for Kenya in June.
The proposed emergency loan facility will therefore be an additional cushion for Kenya amid multiple dangers.
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