The World Bank has approved US$40 million to support Kenya’s growing infrastructure project financing needs through the Private-Public Partnership (PPP) to help meet growing financing gaps estimated at US$4 billion a year, bank executives said Friday.
The project will support Kenya to improve its business environment and generate PPP projects in transport, energy and other sectors that are critical to the transformation of the country from low to middle income status.
Kenya spends about US$1.6 billion a year on infrastructure but requires a sustained expenditure of US$4 billion a year, which is 20 percent of its Gross Domestic Product (GDP), over 10 years, the Bank said.
World Bank Country Director for Kenya Johannes Zutt said the financing gap facing the East African nation is partly to blame for the poor state of doing business in the country.
“Kenya faces a significant infrastructure financing deficit estimated at US$2.1 billion annually, and this imposes a serious constraint to growth and doing business in Kenya,” Zutt said in a statement announcing the Bank’s approval of the financing package.
The construction of new oil and gas pipelines, including three that are ready for financing under this structure once framework is in place, are among the projects that have been identified.
Bank’s analysis shows Kenya’s per capita growth rate can be increased by three percentage points if infrastructure financing is increased to the average of a middle income country.
Bank officials believe accelerating infrastructure development would support the Vision 2030, Kenya’s current economic growth plan and the Bank’s Country Partnership Strategy.
The Bank strategy seeks to enhance Kenya’s regional competitiveness and create jobs.
“Kenya has a large and diversified capital market with promising prospects of becoming a sustainable source of financing for infrastructure project,” said Yira Mascaró, Task Team Leader of the project.
Kenya is seeking to extend and deepen its partnership with the private sector to raise more private investment and expertise to accelerate infrastructure capital formation.