World Bank gives Ruto Sh97 billion lifeline as IMF stays away

The cash-strapped President William Ruto government received a critical financial lifeline on Monday as the World Bank approved a $750 million (Sh97.1 billion) loan, ending months of uncertainty after multilateral lenders froze disbursements over governance concerns.

The World Bank said in a statement that the financing combines a $340 million (Sh44 billion) loan from the International Bank for Reconstruction and Development and $410 million (Sh53.1 billion) in highly concessional International Development Association financing, including dedicated livelihoods support for refugees and host communities.

The disbursement offers temporary relief for the Ruto government, which has faced dwindling external financing options since the International Monetary Fund (IMF) terminated its multi-year funding arrangement with Kenya in March 2025, denying the country a final Sh109.8 billion tranche after it failed to meet performance conditions. With multilateral funding frozen, the Treasury had been forced to rely almost entirely on domestic borrowing to plug a Sh1.1 trillion budget deficit.

The World Bank's approval gives Kenya access to much-needed foreign currency at a time when the government is struggling to meet debt service obligations that consume more than a quarter of the national budget.

A Development Policy Operation (DPO) is a type of World Bank lending that provides direct budget support to a country in exchange for implementing specific policy and institutional reforms. Unlike project-based lending that finances physical infrastructure or programmes, a DPO disburses funds directly to the national treasury to support the government's broader reform agenda.

DPOs are typically structured in multi-year series, with each successive operation building on previous reforms. Kenya's Second Fiscal Sustainability and Resilient Growth DPO follows an earlier operation and supports reforms aimed at strengthening governance, improving public financial management, expanding social protection and establishing a business-enabling environment.

The World Bank had cited three remaining hurdles before releasing the funds: regulations to the Social Protection Act, amendments to the Forest Conservation and Management Act, and an approved sustainability-linked financing framework. Kenya has since cleared the conditions, passing the Conflict-of-Interest Act and gazetting the Conflict-of-Interest Regulations 2026.

The regulations set clear rules to prevent, detect and investigate situations where public officials could use their positions for private gain, introducing stronger penalties and improved disclosure requirements. The regulations close loopholes that have historically allowed conflicts of interest to go unaddressed, according to the World Bank.

"By supporting reforms to address conflicts of interest, strengthen procurement systems, improve public financial management, and expand social protection, this operation will help Kenya reduce leakage, generate fiscal savings, and ensure that public resources deliver better results and reach the people who need them most," said Qimiao Fan, World Bank Division Director for Kenya, in the statement. "It is also helping establish the foundational, business-enabling environment that is necessary to support higher and more inclusive growth and for the private sector to create jobs."

The Ruto government has also directed all ministries, departments and agencies to use the Treasury Single Account, a centralised bank account that consolidates all government cash. This move is expected to reduce idle cash in fragmented accounts, limit costly overdrafts, and give the Treasury a clearer view of government cash balances, helping reduce the risk of leakage and misuse of public funds.

The World Bank programme advances electronic government procurement to make public contracting more open, competitive and transparent. Moving procurement online can reduce corruption risks, increase supplier competition, lower costs and make contracting easier to audit.

The programme supports the Social Protection (General) Regulations 2026, which provide a clearer framework for delivering social assistance. It also backs the use of Kenya's Enhanced Single Registry as the main platform for identifying beneficiaries, helping ensure support reaches the poorest households while reducing duplication.

Talks on a new IMF programme are ongoing, but no deal has been reached. With the next general election scheduled for August 2027, Kenya is now entering the final 14 months before the polls. The IMF had prescribed painful conditions, including higher taxes, job freezes, spending cuts, and restructuring of State-owned enterprises. Analysts say such austerity measures would be politically difficult to implement in an election year. Treasury has already omitted IMF funding from the national budget for the year starting July, and the government has been cautious in approaching fresh talks after the previous programme was terminated over breached conditions.

The Kenya Revenue Authority has persistently missed its collection targets, widening the fiscal pressure on the government. By the end of March 2026, KRA had collected Sh2.038 trillion against a target of Sh2.122 trillion over nine months—a shortfall of Sh84 billion. Ordinary revenues missed the mark by Sh161.9 billion. Corporation tax recorded the largest miss among major tax heads at Sh60.3 billion, ahead of PAYE at Sh50.1 billion.

The missed targets have been compounded by tax concessions, including the halving of value-added tax (VAT) on petroleum products, estimated to cost the exchequer about Sh12.9 billion over three months. Last year, KRA recorded its third consecutive annual shortfall, missing its revised target by Sh47.3 billion.

President William Ruto held talks with World Bank Group President Ajay Banga on the sidelines of the G7 Summit in France on June 16, discussing Kenya's development priorities and mobilising greater investment for sustainable growth.

"The Kenyan government must stay on the path of these reforms to ensure fiscal and debt sustainability," the World Bank said in the statement. "The World Bank Group remains committed to partnering with Kenya to build a more transparent, resilient, and inclusive economy for all Kenyans."