WASHINGTON, August 1, 2000 - The World Bank approved today a US$150 million credit to support Kenya's economic recovery efforts. The Kenya Economic and Public Sector Reform Credit will help Kenya improve economic growth and reduce poverty. It will support the implementation of the country's Interim Poverty Reduction Strategy Paper, whose aim is to improve the living conditions for Kenyans by promoting broad based growth and poverty reduction. This is the first new credit to Kenya from the World Bank in three years-with the exception of the extraordinary El Nino Emergency Project credit that was approved in 1998 to assist in the reconstruction of vital infrastructure destroyed by floods.
This new credit will be disbursed in three equal tranches of US$50 million each. The first tranche of US$50 million will be released in a few days time after a formal agreement for the credit is signed between the Kenyan Finance Minister and the World Bank's Country Director for Kenya. The other two installments will be released upon the government meeting specific performance targets in core reform areas. These include reforms in the areas of economic governance, civil service, and privatization.
The credit will focus on the following broad areas:
- Improvement in the governance framework, particularly in areas that would improve transparency and prudential oversight of government spending.
- Introduction of a budget consistent with the resource envelope constraints determined by a realistic Medium Term Expenditure Framework.
- A shift in the composition of public expenditure towards priority poverty reduction programs identified in the Poverty Reduction Strategy Paper that will be prepared after further consultations on the Interim Poverty Reduction Strategy Paper.
- Right-sizing of the Kenyan civil service in line with the core functions of the government and the priorities of Kenya's Poverty Reduction Strategy Paper.
- Implementation of a more ambitious privatization strategy.
In approving the new credit, the World Bank's Board acknowledged the considerable reforms that the Kenyan government had undertaken in the past year, and its commitment to intensify them in a difficult economic environment, exacerbated by prolonged drought, an energy crisis, and low growth rates. Some of the notable reforms include:
- The Change Initiative announced by President Daniel arap Moi in July 1999, when he also appointed a new team to steer economic recovery by tackling long-standing development problems.
- Reduction of the number of ministries from 27 to 15 in September 1999.
- Broad based consultations between government and other stakeholders in March 2000, leading to the Interim Poverty Reduction Strategy Paper.
- Continuing efforts by the Kenya Anti-Corruption Authority to fight corruption.
- Ongoing privatization of Telkom and the award of two cellular phone licenses.
- Declaration of HIV/AIDS as a national disaster and implementation of new strategies to deal with the pandemic.
- Establishment of the Kenya Roads Board to manage public sector roads projects.
- Strengthening the Central Tender Board and discussions toward further procurement reforms.
- Strengthening the Controller and Auditor General's office.
The Kenyan government is committed to intensifying these reforms and also to undertaking others that are critical to economic recovery in line with the strategies outlined in its Interim Poverty Reduction Strategy Paper. Further consultations by all stakeholders are expected to take place in the coming months, and the final Poverty Reduction Strategy Paper will be ready by May 2001. The World Bank is optimistic that the new thrust of reforms-especially in government restructuring, privatization, improving security, and strengthening institutions responsible for enforcing public sector fiscal accountability and discipline-will have long-term benefits for improving Kenya's economic performance and the living standards of the people.
In addition to the Economic and Public Sector Reform Credit, the World Bank is expecting to go to its board during the next few months with an HIV/AIDS Disaster Response Project and an Emergency Power Support Operation.
The Economic and Public Sector Reform Credit will be financed through the International Development Association (IDA), the World Bank's lending arm for the poorest countries. This IDA credit is on standard terms of 40 years maturity, including 10 years grace.
Media Contacts: In Washington:
Richard Uku (202) 473-3432
Fax (202) 473-7917
E-mail: Ruku@worldbank.org