Kenya seeks $450 million World Bank lifeline as Iran war and El Niño threaten its economy

Kenya is seeking about $450 million in emergency financing from the World Bank as it moves to shield its economy from mounting external shocks, including the impact of the Iran conflict and the threat of extreme weather later this year.

• Kenya is seeking approximately $450 million from the World Bank to protect its economy from external shocks, such as the Iran conflict and potential extreme weather.
• The funds would come from a Contingent Emergency Response Project, enabling rapid access by reallocating up to 10% of undisbursed World Bank project funds.
• This arrangement offers flexible, non-debt financing over up to six years, allowing multiple withdrawals in response to qualifying emergencies.
• The emergency financing comes amid mounting economic challenges in Kenya, including rising debt, delayed payments, reduced tax revenue, and impacts from global oil market disruptions.

Kenya is seeking about $450 million in emergency financing from the World Bank to shield its economy from mounting external shocks, including the impact of the conflict in Iran and the threat of extreme weather later this year.

According to people familiar with the discussions, the East African nation is finalising arrangements for a Contingent Emergency Response Project (CERP). This World Bank mechanism allows countries to redirect existing project funds to respond to crises quickly.

The financing is expected to be available by October, although the amount and timeline could still change, Bloomberg reported.

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Unlike a conventional loan, the facility reallocates up to 10% of undisbursed funds from a country's existing World Bank projects, enabling governments to respond rapidly to emergencies without taking on additional debt. The arrangement can remain in place for up to six years, with countries able to access the funds multiple times if qualifying emergencies arise.

Kenya first announced plans to activate the emergency financing window in April, when Central Bank Governor Kamau Thugge disclosed the government's intention to tap the facility. Neither the National Treasury nor the World Bank commented on the latest negotiations.

Economic headwinds drive demand for support

The funding comes at a difficult time for Kenya's economy. The government is facing mounting debt repayments, delayed payments to suppliers and weaker-than-expected tax revenues, leaving little fiscal room to respond to unexpected shocks.

Economic pressures have intensified following the recent conflict involving Iran, which disrupted global oil markets and pushed up crude prices. The World Bank expects Kenya's economic growth to slow to 4.3% this year from 4.6% in 2025, marking its weakest expansion since the COVID-19 pandemic. The government has already reduced value-added tax on fuel to ease pressure on consumers.

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The country is also preparing for the possibility of a strong El Niño event later this year, which could bring above-average rainfall across East Africa. While increased rainfall may benefit some regions, it also raises the risk of flooding, infrastructure damage, crop losses and disruptions to Kenya's agriculture-dependent economy.

Kenya joins several other countries—including Malawi, the Democratic Republic of the Congo, Bangladesh, Mauritania and Sierra Leone—that have turned to the World Bank's emergency financing mechanism to strengthen their resilience against economic and climate-related shocks.