Kenya adopts major Central Bank reforms to strengthen the financial system

The United Nations (UN) has approved a financial reform that will be in effect for a four-year trial period. The goal of this measure is to strengthen the organization's financial stability amid constant pressure on its liquidity, as well as prevent accounting adjustments that could reduce the actual availability of resources for UN operations, especially peacekeeping missions.

UN Leadership Comments

The Chair of the General Assembly, Annlene Bernbok, stated in a press release that this decision prevents an 'inevitable financial collapse of the UN' by 'modernizing an outdated financial rule that is 75 years old and has long undermined the organization's stability.'

Practical Impact of the Reform

Bernbok added that the measure has a tangible impact on the ground, noting that over $900 million (788 million euros) designated for peacekeeping operations will no longer require borrowing from member states. This will help protect civilian populations and support ceasefires.

Secretary-General's Position

UN Secretary-General António Guterres also welcomed the adopted decision, assessing that it will ensure 'more stable management' of resources. He emphasized that the reform will allow funds to be managed more predictably and responsibly, improving mandate implementation.

Guterres specifically noted that the reform is 'fundamental for operational continuity, especially for peacekeeping operations.' Furthermore, he mentioned that it will benefit his successor, who will be appointed this year, by eliminating the need to return funds that in many cases 'were not even received.'

The World Bank has approved a $750 million financial package for Kenya. The goal of this package is to support economic reforms, reduce dependence on expensive domestic borrowing, and strengthen the country's public finances.

Composition of the Financial Package

According to a statement from the World Bank, the package includes a budget support operation known as the Development Policy Operation (DPO). This operation will provide $340 million from the International Bank for Reconstruction and Development (IBRD) and $410 million in highly concessional financing from the International Development Association (IDA).

This is the seventh DPO that Kenya has received since the approval of the first operation in 2018. This loan will support the reform program initiated by the country, aimed at increasing transparency, efficiency, and fairness in the use of public resources, as well as combating corruption.

Goals of Reforms and Support

The World Bank emphasizes that strengthening governance and preventing corruption are key elements of Kenya's reform program. Kimayo Fan, Director of the World Bank's Kenya Department, noted that this operation will help Kenya reduce fund leakage, ensure fiscal savings, and guarantee that public resources benefit the needy citizens. Furthermore, it contributes to creating a basic environment favorable to business, which is necessary for higher and inclusive growth and job creation by the private sector.

Additional Sustainable Financing

Kenya's public finances have been under strain due to high debt levels and significant budget deficits, which increased pressure on the government to reduce borrowing costs and improve financial management. In addition, the World Bank has approved a sustainable development financing mechanism structured as a syndicated loan of approximately $500 million. This mechanism will be backed by credit guarantees to reduce investor risks and lower Kenya's borrowing costs.

The sustainable development financing will help Kenya diversify its funding sources while supporting goals to slow deforestation rates and expand access to electricity in rural areas.