Signage of the World Bank. File Photo/Pool
By Business Daily Africa
Kenya has become the fourth-largest borrower from the International Development Association (IDA), the soft loan affiliate of the World Bank, which helps the world’s poorest countries, with a total borrowing of $2.01 billion (Sh316.78 billion at current exchange rates).
Latest data from the World Bank shows Kenya in the financial year ended June 2023 tapped Sh316.78 billion compared with $1.8 billion (Sh283.68 billion) tapped in the previous fiscal year when it was the fifth largest borrower. The latest borrowing marks the third consecutive year of increased use of this kitty that is open to 75 countries across the world.
Pakistan was the highest user of the kitty with $2.31 billion (Sh363.27 billion) followed by Bangladesh with $2.3 billion (Sh362.48 billion) and $2.14 billion (Sh336.48 billion) tapped by Tanzania.
Established in 1960, the IDA aims to reduce poverty by providing highly concessional or interest-free loans and grants for programmes that boost economic growth, reduce inequalities and improve people’s living conditions.
“IDA-financed operations address primary education, basic health services, clean water and sanitation, environmental safeguards, business climate improvements, infrastructure and institutional reforms,” says the World Bank in a brief on the kitty.
The funds are allocated to the recipient countries in relation to their income levels and record of success in managing their economies and their ongoing IDA projects.
IDA’s lending terms are highly concessional, meaning that IDA credits carry no or low interest charges.
The financing terms for each member country vary based on an annual assessment of the country’s gross national income per capita, creditworthiness for the International Bank for Reconstruction and Development borrowing, risk of debt distress, and population size.
For a country to access IDA resources, it must be in a situation of relative poverty as indicated by its per capita income falling below the IDA operational cut-off of $1,315 (Sh207,244) and lack creditworthiness for IBRD borrowing.
IBRD funds infrastructure projects in middle-income and creditworthy low-income countries at interest rates higher than those provided by IDA but lower than those offered by other commercial lending agencies.
Kenya is currently classified as a blend country —defined as one in transition from lower middle-income to middle-income– and is creditworthy for lending from both IDA and IBRD.
World Bank recently said Kenya is accessing about $2 billion (Sh315.2 billion) in concessional financing each year, with IDA and IBRD cumulative commitments standing at $8.3 billion (Sh1.31 trillion) in November last year, with $4.4 billion (Sh693.4 billion) available to disburse.
Over the next three fiscal years (financial year 2024-2026), World Bank said, IDA and IBRD expects to provide an estimated $4.5 billion (Sh709.2 billion) to Kenya, including fast-disbursing operations.
The World Bank estimated that $3 billion (Sh472.8 billion) will come from IDA while $1.5 billion (Sh236.4 billion) will be from IBRD, with the bank saying it was fully committed to supporting Kenya in its journey to become an upper-middle-income country by 2030.