Kenya seeks emergency World Bank funds to absorb Iran war impact

Kenya is in talks with the World Bank for emergency funding to help deal with the repercussions of the Iran war, according to central bank Governor Kamau Thugge.

The East African nation is seeking the funds from the Washington-based lender’s Rapid Response Option facility, Thugge said. It allows quick access to as much as 10% of already-approved but undisbursed financing under an existing $1.2 billion program.

The US-Israel war on Iran has roiled the global economy, with the International Monetary Fund forecasting that the spillovers from the conflict will send more African governments to request financial assistance. Kenya, which was at the cusp on an economic recovery, raised fuel prices to the highest in three years and is bracing for a jump in food prices because of rising fertilizer costs.

“Because it doesn’t have to go to the board, these disbursements can take place very quickly,” most likely by June, when Kenya’s financial year ends, Thugge said in an interview in Washington, where he’s attending the IMF Spring Meetings. He said discussions were held this week.

Thugge said that tea and flower exports are taking a hit because of the war. Another fallout could be lower remittances, with about 10% of the total coming from the Middle East.

The Kenyan authorities and the World Bank are working to quantify how much the nation could withdraw.

Separately, Kenya is in talks with the IMF for a new program after prematurely ending the previous one last year. There’s no time line on when the fund and the authorities might reach a deal, Thugge said.

“We continue to have discussions with them,” he said. “The idea would still be to have a funded program.”

There was some “difference of opinion” between Kenya’s Treasury and the IMF over the government’s treatment of future tax income used to fund major infrastructure projects, which the fund said should be accounted for as sovereign debt.

“It’s not like some other countries where debts were hidden, then suddenly they came out from from the blue,” he said. “This one is known. It’s just a difference of opinion.”

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