Why World Bank has delayed Sh78bn emergency loan to Kenya

The funding, however, remains uncertain amid concerns by the World Bank on Kenya’s expenditure plans.

“Yes, the government did request the RRO and has gone through the process of signing up for the option. We are currently in the process of figuring out exactly what expenditures the government would like to support during the time of crisis,” said Anne Bakilana, an operations manager at World Bank Kenya.

The RRO is part of the World Bank’s crisis preparedness and response system and offers access to financing for emergency responses.

“The vehicle created (to support emergency expenditures) can last up to a year and can finance any emergency that would happen during that period, including health sector emergencies, pandemics and flood emergencies,” Ms Bakilana said.

The RRO allows countries to quickly repurpose a portion of their unused World Bank financing across their portfolio to address emergency needs when a crisis occurs. The RRO support facility allows countries to quickly reallocate and use up to 10 percent of their undisbursed bank financing.

A country seeking to access resources from the window must first sign up to the option before identifying the key expenditures to be covered by the emergency funding. The National Treasury previously estimated resources accessible through the RRO at between Sh74.9 billion ($580 million) and Sh77.5 billion ($600 million).

A country seeking to access resources from the window must first sign up to the option before identifying the key expenditures to be covered by the emergency funding.

Kenya requested the financing in April to help it manage economic shocks triggered by the US-Israel war on Iran, which exploded at the end of February.

The funding was seen as critical as the country scrambled to stave off shortages of essential commodities such as petrol and diesel, while keeping inflation under control.

The request for additional funding beyond the DPO exposed growing concerns over the effects of the Iran war on the Kenyan economy, which is sensitive to higher fuel prices, and disruptions to forex inflows from remittances, agricultural exports and tourism.

“We have had very good discussions with the World Bank on the Development Policy Operations (DPO) and also getting additional financing, given the kind of shocks that we are facing…our hope and expectations are that this money will come in this financial year (2025/26),” Kamau Thugge, Central Bank of Kenya (CBK) Governor, said in April.

Fuel accounts for about one quarter of Kenya’s import bill, underlining the impact of the sharp rises in crude prices. The government was forced to halve the rate of value added tax (VAT) on fuel to 8 percent from 16 percent to cushion consumers from higher pump prices.

The National Treasury bets on emergency funding from the World Bank to help plug the resulting revenue deficit, which is estimated at Sh16 billion across three months to mid-July 2026.

Beyond the direct impact of the war on fuel, imports and the market, Kenya is also facing a slowdown in overall GDP growth this year.

Last week, the World Bank cut its growth projection for Kenya in 2026 to 4.3 percent, revealing a 0.6 percentage point reduction from its estimate of 4.9 percent in October 2025.

The projected slowdown is expected to stem from reduced productivity as firms grapple with rising input costs, including fuel and fertiliser.

Higher inflation is also set to erode household purchasing power, weakening demand in the economy.

The World Bank in June approved the disbursement of Sh97 billion ($750 million) to Kenya, under the Development Policy Operations (DPO) facility, which anchors socio-economic reforms, but the multilateral left out its assessment of Kenya’s request for additional resources under the emergency funding window.

World Bank DPOs are a type of financing aimed directly at fostering sustainable economic growth and reducing poverty. Because DPOs deliver unearmarked money straight to the borrower’s national Treasury, they are highly useful for managing fiscal pressures and bridging budget deficits.