The date of the last Country Partnership Strategy (CPS) was May 8, 2014, and updated through a Performance and Learning Review (PLR) dated June 19, 2017, and further extended through the WBG COVID-19 Crisis Response Approach Paper. THE REPUBLIC OF KENYA COUNTRY PARTNERSHIP FRAMEWORK Fiscal Year July 1 – June 30 Currency Unit = Kenyan Shilling (KES) Currency Equivalents US$1.00 = 118.90 KES (July 31, 2022) Managers and staff responsible for this Country Partnership Framework IDA IFC MIGA Vice President Victoria Kwakwa Sergio Pimenta Ethiopis Tafara Director Keith Hansen Jumoke Jagun-Dokunmu Merli Baroudi Camille Nuamah Task Team Leaders Amena Arif Jessica Charles Wade Xavier Furtado TABLE OF CONTENTS I. INTRODUCTION.................................................................................................................................................................................................................................................................. 3 II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA ...................................................................................................................................................................... 3 A. Social and Political Context.................................................................................................................................................................................................................................. 3 B. Economic Trends and Prospects...................................................................................................................................................................................................................... 4 C. Poverty, Inequality and Employment ......................................................................................................................................................................................................... 5 D. Natural Capital and Climate Resilience....................................................................................................................................................................................................... 6 E. Development Opportunities and Challenges...................................................................................................................................................................................... 7 III. WORLD BANK GROUP PARTNERSHIP FRAMEWORK ...................................................................................................................................................................... 15 A. Aligning Kenya’s Vision 2030, Systematic Country Diagnostic and WBG Comparative Advantage .......................................................... 15 B. Lessons from CPS FY14-FY18 CLR and Stakeholder Consultations...................................................................................................................................... 16 C. Proposed Country Partnership Framework ........................................................................................................................................................................................... 16 D. CPF Objectives and Indicative Program..................................................................................................................................................................................................... 18 E. Implementing the CPF Program .................................................................................................................................................................................................................... 25 IV. MANAGING RISKS TO THE CPF PROGRAM ................................................................................................................................................................................................ 28 LIST OF FIGURES Figure 1: Poverty Incidence ....................................................................................................................................................................................................................................................... 5 Figure 2: Gini Inequality Index ................................................................................................................................................................................................................................................ 5 Figure 3: Poverty in NEDI /Non-NEDI Counties ......................................................................................................................................................................................................... 5 Figure 4: Poverty Gap and Vulnerable Population .................................................................................................................................................................................................. 5 Figure 5: Kenya WBG Country Partnership Framework ....................................................................................................................................................................................... 17 LIST OF TABLES Table 1: Kenya IBRD/IDA Portfolio Performance ..................................................................................................................................................................................................... 25 Table 2: Systematic Operations Risk Rating Tool .................................................................................................................................................................................................... 28 LIST OF BOXES Box 1: Capturing Kenya’s Double Demographic Dividends ..................................................................................................................................................................... 9 Box 2: Women’s Economic Empowerment Is Key To Inclusive Growth In Kenya ..................................................................................................................... 11 Box 3: The North and Northeast Development Initiative (NEDI)............................................................................................................................................................ 12 Box 4: The Kenya Gender Platform ............................................................................................................................................................................................................................... 21 ABBREVIATIONS AND ACRONYMS AFD French Development Agency GESDeK Program to Strengthen Governance for Enabling Service Delivery and Public Investment in Kenya AfDB African Development Bank GEWE Gender Equality and Women’s Empowerment ASA Advisory Services and Analytics GIZ Gesellschaft für Internationale Zusammenarbeit ASALs Arid and Semi-Arid Lands (German: Society for International Cooperation) CBK Central Bank of Kenya GoK Government of Kenya CCTP Consolidated Cash Transfer Program GPE Global Partnership for Education CLR Completion and Learning Review GRID Green, Resilient and Inclusive Development CPF Country Partnership Framework HCI Human Capital Index CPIA Country Policy and Institutional Assessment HDI Human Development Index CPS Country Partnership Strategy HLO Higher Level Outcome CSOs Civil Society Organizations HSNP Hunger Safety Net Program CWSCR Coastal Region Water Security and Climate IBRD International Bank for Reconstruction and Resilience Project Development DfID U.K. Department for International Development ICT Information and Communications Technology DPF Development Policy Financing or Development IDA International Development Association Policy Forum IEG Independent Evaluation Groups DPG Development Partners Group IFAD International Fund for Agricultural Development DPO Development Policy Operation IFC International Finance Corporation EAC East African Community IFMIS Integrated Financial Management and Information EACC Ethics and Anti-Corruption Commission System ECD Early Childhood Development IMF International Monetary Fund ECF Extended Credit Facility INT Integrity Vice-Presidency E&S Environmental and Social IPF Investment Project Financing EFF Extended Fund Facility IPP Independent Power Producers EIB European Investment Bank KES Kenyan Shilling EPRA Kenyan Energy and Petroleum Regulatory KenGen Kenya Electricity Generating Company Authority KNBTS Kenya National Blood Transfusion Service EU European Union KPLC Kenya Power and Lighting Company FAO UN’s Food and Agriculture Organization KWCSR Kenya Water Security and Climate Resilience FCV Fragility Conflict and Violence Project FDI Foreign Direct Investment LMIC Lower-Middle Income Country FY Fiscal Year M&E Monitoring and Evaluation GBV Gender-Based Violence MDAs Ministries, Departments and Agencies GDP Gross Domestic Product MIC Middle-Income Country GER Gross Enrollment Ratio MIGA Multilateral Investment Guarantee Agency COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 iii MSMEs Micro, Small and Medium Enterprises SOEs State-Owned Enterprises NDC Nationally Determined Contribution SP Social Protection NEDI North and North-Eastern Development Initiative SSA Sub-Saharan Africa NERs Net Enrolment Rates TA Technical Assistance NSNP National Safety Net Program TFP Total Factor Productivity OAG Office of the Auditor General or Office of the TTL Task Team Leader Attorney General TVET Technical and Vocational Education and Training OECD Organisation for Economic Co-operation and Development UHC Universal Health Coverage PforR Program for Results UMIC Upper Middle-Income Country PFM Public Financial Management UNDP United Nations Development Program PHC Primary Health Care UNICEF United Nations Children’s Fund PIM Public Investment Management USAID United States Agency for International Development PLR Performance and Learning Review VAT Value Added Tax PPA Project Preparation Advance Performance and Policy Actions WASH Water, Sanitation and Hygiene PPPs Public-Private Partnerships WSS Water and Sanitation Services RBF Results-Based Financing WBG World Bank Group RCF Rapid Credit Facility WFP World Food Programme SCD Systematic Country Diagnostic WHO World Health Organization SDFP Sustainable Development Financing Policy WHR Window for Host Communities and Refugees SMEs Small and Medium Enterprises iv COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 Kainuk bridge along Kitale- Lodwar Road in Turkana County constructed under the Africa Regional Transport, Trade and Development Facilitation Project Photo: KENHA I. INTRODUCTION 1 This Country Partnership Framework (CPF) sets out the World Bank Group’s (WBG) strategy for supporting Kenya’s Vision 2030 and to reduce 75 percent), and the resilience of its economy in the face of multiple shocks. But the country is marked by significant disparities and corruption remains an extreme poverty and increase shared prosperity important challenge. Kenya’s international poverty over the period FY23-FY28. Originally planned rate2 declined from 43.8 to 35.8 percent during 2005- for FY21, the CPF was delayed by the onset of the 19, but the poverty elasticity of growth, already Coronavirus Disease 2019 (COVID-19) pandemic1 and trailing other Lower Middle-Income Countries the extra time allowed for an extended consultation (LMICs), also declined from 0.43 (2005-15) to 0.27 process. It builds on the previous WBG Country (2015-20). The Gini index fell between 2005 and 2015 Partnership Strategy (CPS) FY14-FY20 for Kenya, the but appears to have stagnated while Kenya’s north experience of the pandemic, and its implementation and northeast counties remain significantly worse should help lay the foundations for Kenya to become off with poverty rates just under 70 percent. The an inclusive and successful Upper Middle-Income COVID-19 pandemic is estimated to have increased country (UMIC). poverty by 4 percentage points. Adult vaccination rates are expanding steadily reaching 32.6 percent in 2 Kenya outperforms its peers in many respects, yet poverty and inequality have fallen more slowly in recent years. Kenya stands out for its July 2022. Kenya’s demographic trends offer two early and critical dividends: a stabilizing share of children which can help free up fiscal space to tackle service high levels of human capital with the third highest gaps and quality; and a bulge in the cohort moving Human Capital Index at 0.55 in Sub-Saharan Africa through working life who have benefited from (SSA), rapid increases in access to electricity (now at significant human capital investments and who will 1 Given the disruptions and uncertainties brought on by the COVID-19 face lower dependency ratios (see Box 1). pandemic, the WBG COVID-19 Crisis Response Approach Paper (June 2020) extended CPFs ending between late 2020 and early FY22 for approximately one year. 2 US$1.90 in Purchasing Power Parity terms. COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 1 3 To become an inclusive and successful UMIC, Kenya should try to avoid common Middle- still lags LMIC comparators (water and sanitation, environmental conservation, and women’s economic Income Country (MIC) traps of low productivity and empowerment). persistently high inequality, that could ultimately slow growth and threaten social stability. Pivoting toward a more private sector-led growth model that emphasizes job creation, levels the field for 5 The CPF aims to achieve three Higher Level Outcomes (HLOs) through seven CPF Objectives. HLO1 focuses on faster and more equitable labor competition and innovation, raises public spending productivity and income growth supported by CPF efficiency, and captures the benefits of global and Objectives to: (1) boost fiscal and debt sustainability; regional integration, could be key to accelerate (2) strengthen the efficiency and transparency of inclusive growth. Kenya can complement its strong public spending; (3) boost Micro, Small and Medium investments in human capital and basic services by Enterprise (MSME) and small producer success for accelerating efforts to elevate lagging regions/groups job creation. HLO2 aims for greater equity in service as well as tackling constraints to women’s economic delivery outcomes supported by CPF Objectives to: outcomes. Given the impact of climate change, (4) shrink disparities in health and learning outcomes; continued investments in adaptation and renewed and (5) extend sustainable infrastructure services attention to mitigation to stem deforestation, land/ to the last mile (both remote rural communities water degradation and biodiversity loss are essential. and informal urban settlements). HLO3 is greater Strengthening devolution is necessary to address the resilience and sustainability of Kenya’s natural capital, inequities that threaten Kenya’s UMIC ambitions. supported by Objectives to: (6) increase household resilience to, and national preparedness for, shocks; 4 The CPF draws on Kenya’s Vision 2030, a Systematic Country Diagnostic (FY20), a Country Private Sector Diagnostic (FY19), lessons and (7) reduce Kenya’s extreme water insecurity in the face of climate change. from the CPS Completion and Learning Review (FY22), and over 34 stakeholder consultations. It aligns directly with the World Bank’s Africa 6 Given Kenya’s blend status3, CPF financing will comprise resources from both the International Development Association (IDA) and Strategy – i.e., jobs and economic transformation the International Bank for Reconstruction and (JET ), digital economy, human capital, universal Development (IBRD). Financing will be used in access to electricity, climate change mitigation and ways consistent with the Sustainable Development adaptation, and fragility conflict and violence (FCV ), Financing Policy (SDFP), IBRD’s financial capacity, and achieving gender equality. The CPF program and that support Kenya’s objective to move toward will also complement Kenya’s own policy, public and Low risk of debt distress. The World Bank program private sector capacities, and financial commitments will consolidate around core agendas, while support in areas already yielding good results by targeting from the International Finance Corporation (IFC) WBG support toward emerging MIC issues (e.g., and the Multilateral Investment Guarantee Agency external competitiveness, universal health and social (MIGA) will mobilize more private capital. The overall insurance), completing some agendas that still require risk to achieving the CPF’s objectives is Substantial public financing (universal access to electricity, digital with particular attention to political and governance, inclusion), and accelerating progress where Kenya macroeconomic, fiduciary, and social risks. 3 Blend status countries are simultaneously eligible for IDA financing, based on per capita income levels, and considered sufficiently creditworthy to access IBRD resources. 2 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 Public Participation Photo: World Bank II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA A. Social and Political Context education, water and sanitation, environmental conservation, and local roads. County governments 7 Kenya is among the most ethnically diverse countries in the world with an evolving political structure focused on balancing competition, are now established and expanding services that help reduce spatial inequality. The past three local fostering national unity, and securing equitable election cycles reflect a gradual shift towards greater development. In the past, political competition demand for performance and away from traditional was mired in patron-client networks with access voter patronage. Intergovernmental arrangements to resources and services often ethnically aligned, and political settlements continue to evolve. resulting in widening disparities and concerns over political exclusion. These tensions culminated in political violence in 2007, after which the country came together to address long term needs and 9 Kenya has seen notable improvements in governance since introducing the 2010 Constitution. The Constitution confirmed the developed a new Constitution (2010) aimed at separation of powers between the executive, redressing imbalances and securing stronger avenues legislative and judicial branches. Improvements for voice and participation. Since then, the country were also evident in judicial and other actions since has held three largely peaceful and increasingly 2017 and as evidenced following the 2022 election. transparent general elections in 2013, 2017 and 2022. Concerning voice, accountability, rule of law, and regulatory quality, Kenya fares well within Sub- 8 The 2010 Constitution brought a major shift in Kenya’s governance structure (‘devolution’) by establishing 47 county governments with Saharan Africa (SSA), but scores lowest in public sector management and institutions versus other areas on the World Bank Country Policy and Institutional executive, legislative, and regulatory powers. Assessment (CPIA) ratings4. First elected in 2013, county governments were assigned 15 percent of national revenues, and The World Bank’s CPIA is an annual diagnostic tool that assesses 4 made responsible for delivering specific services --- IDA-eligible countries against 16 criteria across four areas: economic management; structural policies; policies for social inclusion; and i.e., health, agriculture, pre-school and vocational public sector management and institutions. COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 3 10 Significant challenges remain corruption. The government has stepped up around its anti-corruption efforts with several new laws and Labor force expansion and rising capital stocks have both contributed to GDP growth (approximately 2.3 percent each from 2004 onwards). However, growth institutions. Nonetheless, the 2019 Global Corruption in Total Factor Productivity (TFP)5 has contributed Barometer survey indicates that the issue continues only 0.9 percentage points annually, lagging Kenya’s to rank among Kenya’s top two challenges (surpassed neighbors as well as its aspirational peers. only by health in 2019 and the economy in 2021) with survey respondents suggesting it is on the increase. 14 Kenya’s growth has been driven by private consumption and public spending, crowding 11 Kenya continues to be affected by fragility, with persistent intercommunal conflicts over scarce resources, displacement, and spillovers out private investment and dampening net exports. Rising private consumption (driving poverty reduction) have been a main driver of growth from radicalization in the Horn of Africa. In Kenya’s (contributing 2.8 percentage points to annual arid north and northeast counties, where poverty GDP growth during 2017-21), followed by public is 68 percent compared to 32 percent in the rest of investment (1.0 percentage points) and government the country (2016), intercommunal violence over consumption (0.7 percentage points, most going pastures and water resources also reflects ethnic and to wages and debt servicing). Meanwhile, private sectarian divisions. The scale of forced displacement investment’s contribution to growth remains across the greater Horn has left Kenya hosting Africa’s weak, with Kenya’s total investment rate hovering fifth largest and most protracted refugee situation in just under 20 percent of GDP. Declining external camps located in its poorest counties. competitiveness, compounded by global economic developments, saw exports make a minimal B. Economic Trends and Prospects contribution to growth (0.1 percentage points 12 Kenya’s economy has shown considerable between 2017-21). With imports growing rapidly, in resilience through the COVID-19 pandemic. part due to capital spending on public investments, The economy is staging a significant, if uneven, net exports are constraining growth. recovery with GDP growing by 7.5 percent in 2021 after contracting by 0.3 percent in 2020. The agriculture sector remained resilient and grew by 4.8 percent in 2020, albeit followed by a decline of 0.2 15 Kenya’s recent growth coincided with a significant increase in debt and a reduction in fiscal space. Alongside the government’s percent in 2021 on account of an ongoing drought. expansionary fiscal stance since 2013, revenues have Services rebounded by 9.8 percent in 2021 after not kept pace with spending. Public revenues fell a contraction of 2.5 percent the previous year, and from 18.1 percent of GDP in 2014 to 16.1 percent in manufacturing by 6.8 percent in 2021 compared to 2019. The related deficits have been financed through a 0.4 percent decline in 2021. The construction and debt with an increase in commercial borrowing. utilities sectors remained buoyant, increasing by 6.6 Public debt rose from 39 percent of GDP in 2012 to and 5.0 percent, respectively. 68 percent by mid-2021, and interest costs from 13.4 percent of revenues in FY13/14 to around 27.5 percent 13 Kenya’s robust economic growth over the past decade has outperformed its LMIC peers. From 2010 to 2019, annual Gross Domestic Product in FY21/22 (some three-quarters owed to foreign creditors). Ongoing uncertainties around COVID-19, the war in Ukraine, and adverse weather conditions (GDP) growth averaged 5 percent with a growing pose significant risks, including to plans for fiscal number of better-educated and healthier Kenyans consolidation. Kenya’s debt remains sustainable, but entering the labor force and contributing more its risk of debt distress has shifted from Low to High than any other factor to the country’s rising GDP. (Annex 4). 5 TFP broadly captures both productivity growth and innovation. 4 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 C. Poverty, Inequality and Employment Households in the bottom 40 percent of the income distribution saw annual consumption grow by 2.9 16 Though economic growth contributed significantly to poverty reduction in Kenya, growth has become less pro-poor in recent years. percent while the bottom quintile saw increases of 3-4 percent per year. However, this trend reflected Robust GDP per capita growth since 2005, along with increases in national income rather than significant growth in private consumption, saw the share of the shifts in resource distribution which remains too population living below the international poverty skewed for inclusive growth. line 6 fall from 43.9 to 33.4 percent (2015-2019); it then rose to an estimated 35.7 percent in 2020 due to the COVID-19 pandemic. Although poverty in Kenya remains below the SSA average and among 18 The fall in monetary poverty in Kenya was matched by significant improvements in dimensions of non-monetary poverty. Kenya’s the lowest in East Africa, it is notably higher than Human Development Index rose from 0.48 in 2005 other LMICs (9.9 percent in 2019). At 0.57 (2005-15), to 0.60 in 2019, surpassing the SSA average and the poverty elasticity of growth is lower than other reaching the 85th percentile of LMICs. Notable LMICs. To eradicate extreme poverty by 2030, an improvements include: education enrollment with annual reduction of 6.1 percent is needed. the secondary gross enrollment ratio (GER) reaching 70 percent (2019); births in health facilities rising to 17 Inequality in Kenya fell between 2005-2015 but has stagnated through 2019. Kenya’s Gini index decreased from 0.45 to 0.39 between 2005 and 2015. 93 percent (2019); and electricity access tripling to 75 percent (2019). FIGURE 1: Poverty Incidence FIGURE 2: Gini Inequality Index 55 50 50.5% 45 50 45 45 40 39 46.8% 40 % of population Gini index (0-100) 40 38.8% 35 37 35 32.1% 36.1% 29.4% 30 30 25 National 25 National Rural Urban National excl. Nairobi 20 20 05 06 07 08 09 10 15 16 17 18 19 05 06 07 08 09 10 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 FIGURE 3: Poverty in NEDI /Non-NEDI Counties FIGURE 4: Poverty Gap and Vulnerable Population 18 18 80 76.2 67.7 16 16 70 16.7 14 14 60 12.2 % of population % of population Index (0-100) 12 12 10.3 50 44.2 10 10 10.4 40 32.6 8 8 Poverty gap (left axis) 30 NEDI 6 Share population within 20% from 6 Non -NEDI the poverty line (right axis) 20 4 4 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Note: The 2019 projections are based on simulations of consumption using the 2019 Kenya Continuous Household Survey (KCHS) and the 2015-16 KIHBS (using SWIFT methodology). The Gini index excludes 10 households in 2019 as their consumption values were outliers. 6 US$1.90 in Purchasing Power Parity (ppp) terms. COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 5 19 However, these welcome outcomes mask significant disparities and pockets of deprivation and many were likely worsened by and pastoral activities.7 Overall, Kenya’s employment rate declined by 6 percentage points to 65 percent in 2019, and the unemployment rate rose from 3.0 to the COVID-19 pandemic. Poverty remains far higher 5.5 percent, accompanied by more inactivity among in Kenya’s north and northeast counties. Although women and those in the counties covered by the poverty fell in these counties during 2005-15, the North and North-east Development Initiative (NEDI). decline was slower than in the rest of Kenya with Wage employment remains concentrated in urban the gap remaining relatively constant even as the areas - 59 percent versus 18 percent in rural areas, broader rural-urban poverty gap shrank from 18.4 and for women it is almost half the share of men. to 9.4 percent. New estimates suggest that the gap for the north and northeast widened through 2019. D. Natural Capital and Climate Resilience 22 The decline in urban poverty has not kept up with Kenya is a high-risk, low-readiness country demographic shifts as the share of poor living in with respect to climate change. Kenya ranks urban areas increased from 14 to 23 percent (with 46 148 out of 182 countries in the 2019 Notre Dame percent of the urban poor living in slums). Some non- Global Adaptation Initiative (ND-GAIN) Country income disparities remain extreme --- e.g., primary net Index of climate change vulnerability and 35th among enrollment is 42 percent in Garissa compared to 96.8 countries least prepared for climate change. Kenya’s percent in Nyeri; women’s labor force participation is projected warming of 2.8˚C exceeds the global mean 21 percent in Marsabit vs. 64 percent nationally; and for the 21 st century with extreme weather events in 11 counties only 50 percent of households access increasing in frequency through 2100. Drought- improved water sources while in 10 counties over 80 induced food insecurity episodes have increased percent do so. from every 20 years (in the 1980s) to every 2-3 years, affecting on average 4.8 million people. In 2020, 20 Vulnerability has increased among the non- poor. The average poverty gap decreased by floods in Kenya displaced more than 800,000 people. 6.3 percent between 2005 and 2015 (Figure 4) as consumption levels of the poor increased. However, the share of population with expenditure levels up 23 Climate change is complicating Kenya’s pursuit of equitable development. Kenya is already a water-scarce scarce country with variable, to only 20 percent above this threshold (and at risk low, and declining freshwater resources against of falling back into poverty from an adverse shock) rising demand. The country’s water availability has rose during this period. More than one-third of halved in the past 30 years with now less renewable non-poor Kenyans are classified as vulnerable, with freshwater per capita than Somalia. In Kenya’s Arid and vulnerability most common in households that derive Semi-Arid Lands (ASALs) which constitute 80 percent most of their income from agriculture, with low levels of its land area and 36 percent of the population, of education, and/or headed by women. households and businesses depend primarily on climate-sensitive activities. The impact of climate 21 Growth and structural transformation allowed many Kenyans to transition out of agriculture during 2005-19, but this transformation has since change on Kenya’s agriculture, livestock, and fisheries sectors and its biodiversity is expected to intensify in coming decades. Relatedly, growing levels of internal stalled and remains uneven. During 2005-15, the climate migration (models estimate 8 percent of the share of employment in agriculture declined from 58 population by 2050) will generate corresponding to 47 percent (from 70 to 45 percent in the Central pressures on Kenya’s social stability. region) but then stagnated at 47 percent during 2016-19. During this period, formal employment also stayed at 17 percent and industrial employment 24 The effects of climate change are being exacerbated by unsustainable land use practices in Kenya that further deforestation, land declined to 10 percent. Services jumped 8 percentage points to reach 42 percent, but much of this was in degradation, and biodiversity loss. Three-quarters the informal sector which captures 89 percent of net of Kenya’s renewable surface water comes from employment growth, outside of small-scale farming 7 KNBS, Kenya Economic Survey 2021. 6 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 forested land, but critical watersheds are degrading drought in the Horn of Africa; global supply chain rapidly due to poor land-use practices, deforestation, challenges; rising food, fertilizer and fuel prices and encroachment on riparian lands. Kenya has lost resulting from the war in Ukraine; and now shifting 12,400 ha of forest annually from 1990 to 2015. Closed rivalries in the global economy. These combined canopy forest once covered 12 percent of Kenya’s shocks are accentuating social vulnerabilities and land area but now covers only 1.7 percent. Erosion inequities that, if not addressed, could entrench hotspots affect about half of the land area in Kenya’s inequality along Kenya’s path to becoming a UMIC. river basins with one in four Kenyans subsisting on Recent analysis8 also highlights the urgency of degrading land. Kenya lost more than 68 percent of Kenya’s job creation challenge given its particular its wildlife between 1977 and 2016, in part due to demographic trends (see Box 1 below) while the landscape fragmentation and agricultural expansions. evolving global economy offer new opportunities for Further declines could threaten its tourism sector, Kenya to reposition itself within global value chains. which generated 8.2 percent of GDP in 2019 and 8.5 Finally, the intensifying pressures of climate change percent of employment, the highest multipliers in have brought new attention to the rapid depletion of Kenya’s northern regions. Kenya’s natural capital. E. Development Opportunities and Challenges Boosting productivity and job creation 25 The SCD identified three critical pathways to reduce poverty and increase shared prosperity in Kenya: boosting productivity and 26 The re-calibration of Kenya’s growth model to boost productivity and private sector job creation will require both macro level interventions job creation; reducing inequality of opportunities that focus on growth and competitiveness and through advancing human capital; and improving micro level interventions that focus on inclusivity. governance for service delivery. Since the SCD’s Recent growth which resulted from consumption publication, Kenya has been hit by: the COVID-19 and government spending has narrowed the pandemic; a desert locust infestation; extreme country’s fiscal space, increased debt vulnerabilities, BOX 1: Capturing Kenya’s Double Demographic Dividends Kenya’s first demographic dividend is due to this stabilizing share of children which provides fiscal space to tackle critical service delivery gaps and improve the quality of education and health to meet the changing age structure. Kenya’s second demographic dividend will come from the immediate increase in its working age population (25-64), which will grow from about 20 percent now to around 40 percent by 2050 but decline thereafter. Because of the country’s sizable investments in human capital, this cohort will form Kenya’s best educated and healthiest workforce from 2025 onwards with the potential to boost economic growth over their working life. They are expected to be more productive while supporting a smaller group of dependents. This share of the population is expected to settle at 18 percent by 2050, with those aged 65+ years reaching 15 percent by 2075. However, without a significant increase in labor-intensive economic growth, this youth bulge could be marked by unemployment and inactivity. Kenya should not miss this rare opportunity to reap its first demographic dividend and prepare well for the second. Kenya’s demographic trends are diverging from some other SSA countries; transitions in fertility and mortality that started 30-40 years ago are now taking hold. Following a steady rise in modern contraception use, a decline in the desired number of children and falling death rates, Kenya has one of SSA’s slower population growth rates (2.28 pa). Though the population is still youthful (40 percent under 14 years and 21 percent between 15-24 years), the base of the population pyramid is beginning to stabilize. Projections suggest that the cohort of children could stabilize at about 25 percent during 2030-40 and the fertility rate could decline to replacement level in 25 years. 8 Kenya Economic Update (December 2021). COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 7 and has not generated the necessary jobs. As such, these opportunities will require more vigorous Kenya must transition to a growth model that boosts implementation of Kenya’s Foreign Direct Investment performance in under-performing drivers: private (FDI) policy alongside improvements in logistics, investment, exports and productivity growth, which regional infrastructure market rules, industry quality are all important for enhancing long-run potential standards, and coordination mechanisms that will GDP and ramping up creation of better-quality jobs ready domestic firms to join global value chains. for new labor market entrants. Doing so will require Maintaining its strategic advantage as an African reforms at the macroeconomic level (e.g., fiscal, trade hub requires that Kenya continue to improve its and investment reforms) as well as microeconomic infrastructure – transport, power and digital – through interventions (e.g., contestability of markets) to help both public and private investments and lead the ensure that growth is inclusive, not subject to elite integration of regional infrastructure markets. For capture and that the benefits extend to vulnerable, example, Kenya ranks relatively well at 68 on the or otherwise marginalized, groups. Logistics Performance Index (2018) but its systems are reaching their limit and the country should shift 27 At the macroeconomic level, Kenya should persevere with fiscal consolidation to avert toward more efficient multimodal freight logistics. macroeconomic instability and strengthen the climate for private investment. Maintaining Kenya’s multi-year fiscal consolidation effort with step changes 29 At the microeconomic level, rebalancing the sources of growth in Kenya will involve changing the role of the public sector in the in debt transparency, fiscal sustainability (domestic market, improving contestability of markets, and resource mobilization) and public expenditure cutting red tape. The level of state intervention efficiency will be essential while continuing to in Kenya’s economy is significantly higher than implement reforms under the SDFP (see Annex 4). other UMICs with the government maintaining Global economic headwinds and increasing climate state-owned enterprises (SOEs) that directly crowd variability also highlight the need to gradually rebuild out private investment in key sectors, such as fiscal buffers and establish more robust risk financing manufacturing, retail, and banking. Given Kenya’s mechanisms. In addition to broadening its tax base, narrowing fiscal space, the country should accelerate revenue mobilization efforts should focus on closing its Public Private Partnership (PPP) program and take leakages and integrating tax collection systems steps to improve governance, increase transparency, across national and local governments. Continued minimize opportunities for corruption and balance implementation of Kenya’s new debt management risk between public and private sector players. The strategy – which has already yielded a 7.5 percent country also has notable restrictions on competition reduction in the share of expensive commercial debt in some sectors including agriculture, construction, since 2019 – should help to reduce crowding out of telecoms, insurance, and a few professional services. the private sector in financial markets and help raise Rolling back these restrictions to facilitate effective Kenya’s stock of private sector credit to GDP from 25.2 competition and tackle de-jure or de-facto cartels (in percent toward the LMIC average of 46 percent. public procurement and in private markets) would help boost innovation, lower prices, and create jobs. 28 Kenya stands to benefit significantly from existing9 and emerging trade and investment agreements with new opportunities from evolving Significant gains would also come from simplifying Kenya’s complex, costly, and unpredictable regulatory environment by streamlining regulations, licensing, global value chains potentially accelerating growth administrative requirements and by leveling the and job creation. Realizing the full potential of playing field across the private sector. Kenya was the first signatory of the African Free Trade Common 30 Boosting job creation and productivity will 9 Market in 2018, has concluded an Economic Partnership Agreement (EPA) with the UK in 2020, has started bilateral implementation of also require labor market interventions on European Union-East African Community EPA in 2021 and is currently both the demand and supply sides. On labor negotiating a Free Trade Agreement with the US that will position the country at the forefront of Africa as the US Africa Growth and demand, in addition to the measures in paragraphs Opportunities Act (AGOA) expires in 2025. 8 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 26-28 to spur larger scale private investment, Kenya systems would benefit nutrition, commercialization, should accelerate productivity improvements and and resilience. But further investments are needed commercialization of small producers as well as MSME in value addition, food safety institutions, and to access to finance, markets, and new technologies, stabilize regional trading rules. given the dynamic role this segment of the private sector can play in near-term job creation. On the supply side, tackling barriers to women’s economic participation (see Box 2) will require focused 32 Unleashing Kenya’s vibrant MSMEs is essential to accelerating the creation of better jobs. MSMEs account for 99 percent of firms and 82 percent interventions to strengthen women’s business skills, of jobs in both licensed and unlicensed firms. A access to market information and business networks, recent study11 finds that Kenya is at par with regional and value addition. With 80 percent of the labor force peers and outperforms some global comparators in in the informal sector, economy-wide productivity terms of MSME firm creation, but survival rates are gains will occur only if workers see an increase in low. Key challenges facing MSMEs include insufficient their productivity. Likewise, to ensure an inclusive access to finance, a lack of skills and low uptake of labor market, more can be done to help vulnerable technology. youth find jobs as well as support the informal sector where most Kenyans work.10 Reducing inequality in opportunities and outcomes 31 Increasing productivity in the agriculture sector requires investments in infrastructure, 33 Kenya has made impressive gains in human capital development, extending basic services to most of its population. Robust service delivery value chains, and commercialization. Despite and sustained financial commitments to health and agriculture’s major role in employment (47 percent) education have yielded a comparatively high rank and exports (65 percent), productivity growth has on the Human Capital Index (HCI). Lagging regions been elusive. The Agricultural Sector Transformation have benefited from a surge in financing during and Growth Strategy (2019-2029) aims to: (i) raise small devolution which county governments have used producer incomes by scaling enterprises to provide to expand access to education, health care, water inputs, processing, and aggregation; (ii) increase and sanitation, roads, and urban settlements. The output and value-added through large private farms national government has invested in universal access and processing hubs; and (iii) boost food security with to electricity, road corridors in remote regions, urban community interventions in pastoralism and fishing. water infrastructure, and more comprehensive safety With Kenya’s urban population expected to increase net systems for vulnerable households. rapidly through 2050, stronger value chains and food BOX 2: Women’s Economic Empowerment is Key to Inclusive Growth In Kenya Kenya has a well-developed policy, regulatory and institutional framework addressing gender inequality, yet women’s labor market and entrepreneurship outcomes continue to lag significantly. At 64 percent (2018), Kenya’s female labor force participation rate is significantly lower than in Ethiopia (77 percent) and Tanzania (80 percent); in some parts of northeastern Kenya, it is less than 20 percent. In 2019, women accounted for only one-third of wage employees with a wage gap of 30 percent. Women face significant challenges in owning property, using bank accounts, and in using mobile internet and mobile money.10 Women-owned businesses dominate Kenya’s MSME landscape (61 percent of unlicensed and 31 percent of licensed MSMEs) but their average profits are roughly one third of male-run enterprises. Further analysis is needed to understand and tackle the hidden constraints and bottlenecks that hold back women’s economic outcomes in Kenya. CPF consultations suggest that early marriage, limited access to quality childcare, high levels of gender-based violence (GBV) and early educational segregation may play a role. Mobile Gender Gap Report 2020; Kenya Poverty and Gender 10 11 Bridging the Technological Divide: Technology Adoption by Firms in Assessment (2018) Developing Countries (World Bank, 2022). COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 9 34 However, there is scope to do more to address inequalities in social outcomes and infrastructure services between poorer and richer enrolments are low and socioeconomic conditions differ. The government is hiring more teachers annually and improving teacher allocation, but counties and within rural and urban counties. deployment remains uneven, in part due to security Addressing these disparities will require differentiated issues in some counties. Improving pre-school quality and more targeted approaches, particularly in areas will require a quality framework and tackling the large with worsening climatic conditions, low population share of untrained teachers. densities and different cultural norms, while closing infrastructure gaps will require sustainable financing models and an optimal use of private investment. Development partners, including IDA, formulated 36 In health, Kenya has implemented major reforms that have increased access to a growing package of basic health services and increased and are implementing the NEDI (see Box 3) as one household financial protection from health shocks. tool to address disparities in this part of the country. Devolution has yielded a 34 percent rise in the number of facilities and a 46 percent increase in 35 Kenya has a comparatively good track record on education, now focused on improving learning outcomes. Reforms to modernize curricula, public health worker density. But serious challenges remain including: the need for more staffing and inputs; high out-of-pocket payments; low health improve teacher development-deployment, expand insurance coverage; poor coordination, spending textbook distribution and investment in technology inefficiencies and crippling funds flow arrangements are improving learning outcomes, but these remain which hold back quality improvements at the front low compared to other MICs and very low compared line; the need to rebalance health spending from to UMICs. Wide spatial, gender and income disparities secondary and tertiary to primary care; and to expand persist: expected years of schooling range from 6.5 the basic package of services to cover communicable to 13.8 years between counties; girls have notably and chronic diseases will also be critical. lower primary completion and higher dropout rates which worsened during the pandemic12.13Kenya still has areas where 60 percent of girls can be found out of school. Tackling these challenges will require 37 Kenya should continue to expand its progressive social safety net system, by increasing coverage, raising transfer amounts, aligning reforms to improve school management linking beneficiaries to broader services, and and teaching and input supply, at scale. Kenya’s improve targeting. Kenya has consolidated four cash primary capitation grants may need adjusting where transfer programs and modernized delivery systems BOX 3: The North and Northeast Development Initiative (NEDI) Addressing the historic marginalization in its north and north-east region is priority for Kenya and will require a sustained focus. With only 12 percent of the population, NEDI counties account for almost one-quarter (24.2 percent) of Kenya’s poor. Vision 2030 includes a dedicated strategy for Northern Kenya13 which attracted a significant expansion of development partner financing to the region. Over 23.5 percent of the World Bank’s Kenya portfolio comprises both NEDI-specific operations and national operations with enhanced implementation support for NEDI counties. Despite some progress, the NEDI region continues to significantly lag the rest of the country. Educational attainment, access to improved sanitation, and despite some convergence, access to health facilities remain far behind the rest of the country. The spatial disparities, combined with weak institutions and regional conflict dynamics, contribute to high levels of conflict and violence. In addition to sustaining financial flows, three adjustments are warranted: (i) to strengthen national and county government ownership and leadership of NEDI by institutionalizing multi-sectoral and multi-level coordination structures; (ii) greater engagement with sub-county and traditional institutions; and (iii) a greater focus on intra-NEDI and intra-county variation in development outcomes. Population Council, “Impact of COVID-19 on adolescents in Kenya” (2021). 12 Government of Kenya (2012), Vision 2030 Strategy for Northern Kenya 13 and other Arid Lands. 10 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 with electronic payments, a single beneficiary developed, water storage capacity of 103 m3 per registry, and its globally recognized ongoing Hunger capita is well below the SSA average and countries Safety Net Programme (HSNP). However, despite this with similar hydrology and water productivity 15 at expansion, only 32 percent of safety net spending only US$14 per cubic meter, below the LMIC average reaches the poorest 20 percent of the population, of US$25. Piped water covers only a third of the although this varies by program; only three percent population and twice more Kenyans have access to of children are covered by cash transfer programs; electricity than basic sanitation. Kenya can focus on and the overall value of transfers has eroded in real least-cost, sustainable, county-level interventions terms since 2012 suggesting the need for indexation. to improve services at scale. Measures to improve To help address these weaknesses, Kenya should water utilities’ performance could mobilize up to further strengthen the single registry and continue US$1.5 billion and enable revenue-based commercial to innovate with cash “plus” pilots that provide added financing. New low-cost technologies in rural WSS, interventions, such as nutrition, health, and savings/ non-sewered urban sanitation, farmer-led irrigation asset accumulation. and small-scale water harvesting are areas where gains are possible in the shorter term and at lower costs. 38 Kenya is taking steps to integrate service delivery and build self-reliance among refugees as a step toward resolving its protracted situations. 41 Kenya has made excellent progress on access to transport, but more is needed to maintain Kenya’s stability provides a favorable environment and upgrade rural roads, tackle urban congestion, for refugees and the country is aligned with global and address road safety. Major reforms over the and regional commitments. However, most refugees last two decades resulted in significantly better road and their host communities still suffer high levels of conditions and a nascent, but promising, increase in deprivation, intermittent food insecurity14 and related private financing to the sector. Today, 70 percent of tensions. Building on the 2021 Refugee Act and a new Kenya’s rural population live less than 2 km away from strategy (2020-2024) to further implement the global an all-weather road, but only 57 percent of the roads Comprehensive Refugee Response Framework, the are in good condition (up from 44 percent in 2009). country is now working with partners to find more Other key challenges and opportunities ensuring sustainable solutions. greater equity of transport services include crippling congestion in Kenya’s major cities, potential from 39 Kenya is one of the few countries in SSA with the potential to achieve universal electricity access by 2030 on a fully green grid if it can overcome railway reforms and investments, and Kenya’s very high road traffic fatality rates, which are worse than African and global averages. current financial and governance challenges. Kenya has one of the more robust electricity sector policy and regulatory frameworks in Africa, and has resolved large supply deficits, albeit at high average costs. 42 Harnessing the urban transition would permit Kenya to capture and spread agglomeration benefits, but today the full potential of the country’s Continued external support is needed to both recover cities is not being realized. The share of those living financial stability and complete the electrification in urban areas is projected to increase from 31 to 50 program. Given periodic governance challenges, percent by 2050. 16 Continued challenges include: a Kenya might consider further private participation in low share (about 58 percent) of the urban population core utilities, including in transmission. with access to piped water and the reliance by most cities/towns on water rationing programs; 40 Access to water and sanitation services (WSS) in Kenya lags other basic services. Kenya’s water availability has halved in the past 30 years, the need for better quality and maintenance of municipal drainage, street lighting, and solid waste management; better integration of municipal and it now has less renewable freshwater per capita spatial plans into county planning and budgeting than Somalia. Only 15 percent of water resources are 15 Constant 2010 US$ GDP per m3 of total freshwater withdrawal. World Bank (2021), Socioeconomic Impacts of COVID-19 in Kenya on 14 16 2019 Kenya Population and Housing Census; Kenya Urbanization Households Rapid Response Phone Survey, Rounds 1-3. Review (2016). COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 11 frameworks; the need for legal, regulatory, and which constrain service delivery and frontline institutional frameworks to coordinate and facilitate quality improvements; and delayed payments to financing of Kenya’s metropolitan regions. vendors, which trigger liquidity shortages across the private sector. Significant opportunities also exist to 43 Although Kenya is advanced digitally, broadband access and affordability remain key constraints to digital inclusion. Around 94 strengthen Kenya’s expenditure control framework by regularizing accountabilities in internal audit and building capacity for citizen engagement with percent of the population is covered by 3G or higher frontline facilities and with national and county signals. Yet rural areas and some secondary cities legislatures. remain underserved and, more generally, service 45 quality and reliability are problematic. For example, Good progress has been made in strengthening less than half of schools and health facilities have the institutions and systems needed for access to fixed broadband and only 17 percent of effective devolution, but key constraints remain. rural residents use the internet weekly. IFC estimates These include acute capacity constraints at the that 230 million jobs in Africa will require digital skills local level, ambiguities in financing arrangements, by 2030, presenting investors with a US$130 billion and weak vertical coordination. 18 The COVID-19 opportunity and Kenya the option to leverage the pandemic and the extreme drought on the Horn of private sector to develop its tech talent. 17 Africa brought many of these challenges to the fore. Kenya should continue to strengthen institutional Improving governance for service delivery and intergovernmental coordination, improve 44 The success of Kenya’s fiscal consolidation efforts depends on increasing efficiency and impact of spending, and reducing the the efficiency of fiscal transfers, clarify the vertical division of fiduciary accountabilities, and re-channel some line ministry spending (which in some cases opportunities, for corruption. Priorities include has doubled since devolution) to frontline facilities. improving: poor information flows, which limit County governments must fully implement the Public budget transparency and create myriad opportunities Finance Management Act (2012), strengthen their for corruption; uneven and delayed resource flows, financial reporting, further decentralize resources Farmers using an agricultural app Photo: Davasha Photography Digital Skills in Sub-Saharan Africa, IFC and LEK Consulting, 2019. 17 18 Making Devolution Work for Service Delivery (2021). 12 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 to subcounty institutions and strengthen control budgeting, more can be done to engage citizens frameworks over their own source revenues. Kenya’s around the implementation and monitoring of public ongoing National Capacity Building Framework projects through Gov-Tech and Civic-Tech. World provides a blueprint for strengthening the devolution Bank grievance response mechanisms have helped to value chain and, with improvements in county level improve the government’s engagement with citizens socioeconomic data, should help Kenya accelerate its and can be used to strengthen accountability. progress toward its devolution dividend. Broader public participation can also help tackle other types of corruption that affect ordinary citizens 46 High levels of corruption reported in Kenya persist despite efforts to strengthen legal, institutional and engagement frameworks. The and businesses. Anecdotal evidence suggests that public sector hiring, licensing, permitting and other red tape provide ample scope for graft and constrain performance of these frameworks has been mixed, in both private investment and Kenya’s efforts to ensure part due to institutional and coordination weaknesses. equitable services and opportunities. Strong efforts are afoot to close loopholes and ensure better monitoring (e.g., of public official asset declarations). Kenya should continue to strengthen prevention and enforcement mechanisms including 48 As a rising MIC, Kenya’s anti-corruption efforts should seek to broaden the bargaining space for policy making to prevent regulatory capture in internal and external audit, judicial processes, that protects vested interests and entrenches national and county legislatures, as well as private inequality. Recent research suggests the growing sector codes of ethics, while exploring new strategies inequality being experienced in advanced economies and mechanisms to tackle corruption. is, in part, a symptom of implicit rules of the game that result in the concentration of economic benefits 47 Constitutional requirements for public participation provide a powerful avenue to increase transparency and accountability. of growth over time. Kenya is at the stage where such rules and institutions are still evolving and can ensure more equitable development by protecting its policy While implementation has largely been focused space for the benefit of all Kenyans. on consultations for regulations on planning and School children learning using tablets Photo: Sambrian Mbaabu COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 13 Building climate and disaster resilience also leverage more private investment in new wildlife 49 Kenya’s Nationally Determined Contribution conservancy management models, particularly in the (NDC, 2020) and National Climate Change northeast regions where a large share of its wildlife is Action Plan 2018-2023 identify the need to located. accelerate efforts: (a) upstream, to stem further deterioration of Kenya’s watersheds, forest cover, and biodiversity assets and to restore degraded 51 Midstream, Kenya is undertaking actions to build climate and disaster resilient communities, infrastructure, and public finances. landscapes; (b) midstream, to increase the productivity of its water resources, adapt to more An innovative pilot that helped local communities climate smart production, and build climate and understand micro-climate impacts and undertake disaster resilient communities and infrastructure; and resilience investments is being scaled up through (c) downstream, to shift to a greener growth model the Financing Locally-Led Climate Action Program by mobilizing more climate and green financing (FLLOCA, P173065) that works across all 47 counties. and with policies that encourage private sector Some newly established municipalities have invested investment in sustainable activities. Shifting away in key climate infrastructure such as flood protection from roads to greener forms of transport, in both and will receive future support to integrate resilience urban and regional contexts, could further reduce strategies into urban planning. Kenya’s new public emissions in line with Kenya’s NDC commitments. investment management system integrates climate Kenya should also expand coverage of instruments considerations into all future projects. However, that protect communities from climate shocks --- i.e., disaster risk management institutions and finance safety nets and social insurance, crop and livestock remain fragmented. Accelerating work on national insurance and disaster risk financing. and county level disaster funds, contingent credit facilities and options to transfer catastrophe risk to 50 Upstream, Kenya’s NDC includes an ambitious target to restore forest cover while Vision 2030 prioritizes achieving more sustainable land insurance markets could help mitigate the costs of these shocks. management. Around 4-5 million Kenyans benefit directly from forests that also provide a host of un- marketed public goods (e.g., biodiversity, carbon 52 Downstream, Kenya’s NDC includes an ambitious target to reduce emissions by 32 percent relative to the business-as-usual scenario of sequestration and slower land degradation). Kenya 143 mtCO2e by 2030 which will require a significant therefore aims to restore forest cover to 12 percent increase in financing. Kenya has targeted 100 of its land area by 2030, from 7.2 percent in 2019. percent renewable energy by 2030 and preparations Building on its 2020 National Integrated Water for issuing green bonds, including identification of a Resources Development Plan, new plans are being relevant investment pipeline, are advanced. A Green prepared for each of Kenya’s five river basins. In both Industrialization Policy and e-Mobility Strategy are these areas, expanding Kenya’s fledgling system of also under preparation and could be expanded to payment for environmental services could help to include other infrastructure services like digital. align incentives and accelerate outcomes. Kenya can 14 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 A section of the 105 Km Emali-Loitoktok in the South Rift Valley Photo: KENHA III. WORLD BANK GROUP PARTNERSHIP FRAMEWORK A. Aligning Kenya’s Vision 2030, Systematic Country calls for “reducing inequality of opportunities through Diagnostic and WBG Comparative Advantage advancing human capital” by improving access to and 53 The FY23-FY28 CPF aligns with Kenya’s Vision the quality of healthcare and education outcomes. 2030 , priorities identified in the SCD, lessons The third, “improving governance for service delivery,” from the CLR of the previous CPS and builds on the prioritizes strengthening devolution (to enhance local WBG’s comparative advantages in Kenya. service delivery), anti-corruption mechanisms, and institutions. The CPF elevates the SCD foundational 54 Vision 2030 aims to transform Kenya into a competitive and prosperous country with a high quality of life. Its priorities include: (i) sustaining issue of “environmental sustainability” to an HLO of “resilience and sustainability of Kenya’s natural capital” in line with the WBG’s framework for Green, Resilient, 10 percent average annual economic growth until and Inclusive Development (GRID) and Kenya’s NDC 2030; (ii) creating just, cohesive, and equitable social commitments under the 26th UN Climate Change development in a clean and secure environment; Conference of the Parties (COP26). and (iii) building a democratic political system that respects the rule of law and protects the rights and freedoms of every individual in Kenyan society. 56 The CPF targets critical areas where either government capacity and/or support from other development partners is insufficient to 55 The three pathways and seven priorities identified in the Kenya SCD (FY20) align with the HLOs and specific objectives of this CPF. The first accelerate progress toward specific outcomes. The CPF avoids areas in which Kenya’s policy, institutional and implementation capacity and pathway, “boosting productivity and job creation”, financial commitment suggest there is little to no seeks to improve the operating environment for firms, need for sustained external assistance (e.g., primary commercialization of agriculture value chains and enrollment) and reserves WBG support: for emerging infrastructure upgrades to open new markets. The second complex MIC issues (e.g., social insurance, equity COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 15 in learning outcomes, payment for environmental and preventing them from optimizing their services); to complete some agendas that require contribution to Kenya’s development objectives. public financing (e.g., universal access to electricity, This CPF will therefore include a new Kenya Gender digital inclusion); and to accelerate progress where Platform (see Box 4). Kenya continues to lag LMIC comparators (agricultural • Effectively fighting corruption in Kenya requires a productivity, rural sanitation). more strategic approach. The CPF includes targeted reforms in key areas susceptible to corruption, B. Lessons from CPS FY14-FY18 CLR and a deeper focus on strengthening government Stakeholder Consultations transparency, more capacity building to link citizens 57 Lessons from the previous CPS (FY14-18 see Annex 2) have informed the design of this CPF. The CLR found the overall performance of the and beneficiaries to effective control mechanisms, and a shared approach with other development partners. • The WBG impact in Kenya was not sufficiently previous CPS to be Moderately Satisfactory and captured in the CPS Results Framework, including the WBG performance to be Good. Two of the ten its knowledge and policy dialogue contributions. objectives were partially achieved, viz agricultural This CPF includes more outcome-level indicators and productivity and citizen feedback on service quality, a Monitoring, Evaluation and Learning Plan to help though the objective concerning managing risks inform course corrections. from climate change, was not achieved. The main lessons are as follows: • A more targeted approach is required for Kenya to avoid the MIC inequality trap. This CPF will take 58 This CPF benefits from extensive stakeholder consultations. From November 2021 to May 2022, the WBG held 34 consultations with around a more direct approach to shrinking disparities in 500 participants. Participants included indigenous/ outcomes by targeting communities that lag behind historically underserved communities, youth, and to levelling access to opportunities through industry civil society organizations (CSOs), start-up regulatory and institutional reforms. innovators, development partners, private sector • The WBG has kept pace with Kenya’s devolution leaders, media outlets, the National Assembly, the process, but a portfolio-wide approach to Senate, the Council of Governors, and the technical institutional development is now necessary. The teams of the main candidates in the 2022 elections. CPF will engage more with national institutions Additional discussions took place following the along the intergovernmental chain, build deliberate inauguration of the new administration. These synergies across devolved projects, and improve tracking of county- level performance to monitor devolution outcomes. • Project design and implementation in the NEDI counties require more cross-cutting, conflict-, and security-sensitive approaches. This CPF will employ a multi-sectoral NEDI strategy and coordinated NEDI-wide practices across the portfolio. • Achieving gender equity in Kenya requires deeper analysis to Kenya Youth Employment Opportunities Projects’ Business Plan Competition Awardees uncover the hidden constraints Photo: KYEOP, GoK holding women and girls back 16 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 consultations confirmed broad agreement improved labor market outcomes, particularly with the framework with concerns shared for lagging groups. This outcome will be tracked around Kenya’s indebtedness, competitiveness, through private investment as a share of GDP, value corruption, and county-level capacity. Participants added per worker as a measure of productivity, also called for more emphasis on inclusion and youth inactivity levels, and the Gini index. multi-sectoral interventions. Additional issues are (b) greater equity in service delivery outcomes which summarized in Annex 7. will require closing existing gaps and more consistent efforts to tackle current and future C. Proposed Country Partnership Framework inequities by fortifying relevant institutions and 59 This CPF will work toward three long-term HLOs and seven CPF Objectives. The HLOs focus on two time-sensitive issues facing Kenya. First, Kenya programs, such as safety nets. This outcome will be tracked by the dispersion of county level HCIs, progress toward universal access in electricity, has a timebound opportunity to address inequality and sustainable financing for safety nets. of opportunities and outcomes that other MICs and (c) greater resilience and sustainability of Kenya’s high-income countries have shown will prove more natural capital that is needed to safeguard difficult to address if left too late. These issues have growth and social welfare in the face of climate also been brought into stark focus by the COVID-19 change and more frequent weather shocks. pandemic. The second is the urgent challenge of Kenya’s overarching climate challenge is around climate change where Kenya must do more on water security (and relatedly food security) and mitigation even as it pursues faster adaptation. The will require improving water production while HLOs are as follows: reversing land degradation and loss of forest (a) faster and more equitable labor productivity cover. This outcome will be tracked by water and income growth that will require sustained productivity, land under forest cover, and a food economic growth, faster job creation, and security index. FIGURE 5: Kenya WBG Country Partnership Framework (including indicative IDA20 pipeline) CPF Objectives High Level Outcomes 1 Boost Kenya’s fiscal and Faster and more equitable debt sustainability labor productivity and income growth 2 Strengthen public expenditure transparency & effectiveness 1 7 Goal 3 Foster MSME & small producer success for faster job creation To support Kenya’s Greater equity in service delivery transformation into 4 Shrink disparities in learning outcomes a middle-income and health outcomes economy that 3 4 5 7 achieves inclusivity 5 Extend infrastructure services to the last mile and resilience Greater resilience and 6 Increase household resilience to, sustainability of Kenya’s and national preparedness for, shocks natural capital 7 Reduce Kenya’s water insecurity 1 2 6 7 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 17 60 The CPF Objectives are aligned with the Sustainable Development Goals (SDGs, see Annex 1), the WBG Green, Resilient and Inclusive 62 The CPF aligns with the WBG’s FCV strategy, East and Southern Africa’s Horn of Africa Initiative (HoAI), and the IDA20 Window for Host Development (GRID) strategy, IDA20’s policy Communities and Refugees (WHR). The CPF’s commitments (see Annex 5), the World Bank Africa approach to NEDI (Box 3) is in line with the FCV Strategy, the IFC Strategy and Business Outlook Strategy’s focus on pockets of fragility within non- Update FY23-25, MIGA’s Strategy and Business FCV countries. The CPF program includes Kenya’s Outlook FY21-23, and the WBG Global Crisis Response large portfolio of World Bank-financed HoAI Framework 2022. The CPF captures the GRID operations and will continue to support Kenya’s priorities directly in its HLOs and aligns with the four efforts (and technical and political leadership) to aspects of the GRID approach --- i.e., (i) simultaneous build cross-border linkages and improve services attention to the challenges of poverty and climate in its fragile borderland areas. Finally, the CPF will change with HLO3’s focus on the sustainability of support Kenya’s announced shift toward building Kenya’s natural capital and household resilience self-reliance and integrated service delivery in (Objective 6) and on water security (Objective 7); Kenya’s longstanding refugee encampments as well (ii) global cooperation on climate by targeting as their host communities; this includes through Kenya’s forest cover NDC in HLO3; (iii) scaling and IFC’s ongoing Kakuma Kalobeyei Challenge Fund accelerating investments on GRID priorities by that is attracting the private sector to the Kakuma continuing portfolio consolidation (paragraph 92); and Refugee Camp and Kalobeyei Integrated Settlement, (iii) reducing inequality and exclusion (HLO1, HLO2, and and with IDA20 WHR resources. CPF Objectives 3, 4, 5 and 6). D. CPF Objectives and Indicative Program 61 The alignment of the IDA, IFC and MIGA strategies around the special themes of inclusive business and jobs, climate change/ climate business, addressing FCV, and digital technologies is also reflected directly in the CPF HLOs and Objectives. Although not noted or explicitly listed in the HLOs and Objectives, the CPF includes a strong focus on gender (see Box 4) within CPF Objective 3 and CPF outcome and supplementary progress indicators 3.3, which stipulate a portfolio wide focus and planned operation on women’s economic empowerment. Nairobi skyline The CPF also reflects IDA20’s additional special theme Photo: Ted Kenya of human capital (Objectives 3 and 5), and cross cutting issues of debt (Objective 1), governance and OBJECTIVE 1: BOOST KENYA’S FISCAL AND DEBT institutions (Objective 2), technology (Objectives SUSTAINABILITY 2 and 4), and crisis preparedness (Objective 5). Annex 5 lists all the IDA20 Tier 1 and Tier 2 special themes and cross cutting issues to which the CPF is 63 Under Objectisve 1, the CPF program will help Kenya to re-create fiscal space that deteriorated due to rising debt service, the expected to contribute. In addition, better upstream collaboration with IFC and MIGA through product COVID-19 pandemic, climate shocks and global innovation and on private capital mobilization has headwinds, and rebuild its fiscal buffers over already strengthened the impact of WBG programs the medium term. The program will include: (a) in Kenya (Annex 2) and will continue in this CPF development policy financing (DPFs) to help (paragraph 93). accelerate fiscal and investment climate reforms and 18 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 lower Kenya’s borrowing costs; (b) a steady scaling OBJECTIVE 2: IMPROVE PUBLIC EXPENDITURE up of IFC investments, MIGA guarantees and Bank TRANSPARENCY AND EFFECTIVENESS program/project lending that support private sector investment, private capital mobilization and PPPs (also under see Objectives 3, 5 and 6); and (c) technical 64 Under Objective 2, the WBG will support Kenya in strengthening the efficiency and accountability of its public spending, capturing support to help Kenya capitalize on new trade and integration opportunities and deepen financial the full development dividends of devolution, and intermediation. On the financing side, the WBG will tackling corruption. Reform measures to increase the efficiency and equitable allocation of public spending also continue to support Kenya’s efforts to deepen will be a continued focus of future development capital markets and mobilize longer term financing policy financing series. Annex 4 summarizes relevant through IFC investments and MIGA guarantees in and ongoing reforms under the SDFP. The ongoing the financial sector, and technical support in the Program to Strengthen Governance for Enabling insurance sector, and leveraging green and climate Service Delivery and Public Investment (GESDEK, finance. The ongoing Affordable Housing Program P161387) supporting Kenya’s Public Financial (P165034), Infrastructure/PPP Project (P121019), the Management Reform Strategy (PFMRS) would IDA and MIGA guarantee programs in the energy and be followed by a new Governance Improvement transport sectors and Kenya’s recent Memorandum operation (FY24) supporting the complete rollout of of Understanding with IFC on support to strengthen core government systems, and the upcoming Digital and improve the governance of the PPP pipeline Economy Acceleration Program (KDEAP, P170941, will help Kenya accelerate its private financing for FY23) that will, inter alia, help to modernize of digital infrastructure and public service delivery alongside government platforms and e-government services. embedded activities in agriculture, digital, water Both programs will jointly support a rationalization and sanitation sector operations. A strong ASA of government information systems to improve program will include a Public Expenditure Review public sector coordination, shrink opportunities (FY25), a Country Economic Memorandum (FY26), for corruption and increase transparency. The new a Joint Capital Market Program, biannual Kenya Eastern Africa Regional Statistics Program (P176371) Economic Updates, technical assistance in public will further support the production and use of robust finance, investment and debt management, state- data and statistics to strengthen evidence-based owned enterprise and trade reforms, as well as decision making and transparency. communications support for building policy reform coalitions. Key outcomes are expected to be lower risk in Kenya’s external debt profile and greater private capital mobilization, including through PPPs 65 To support Kenya’s devolution process, the World Bank will continue capacity building for county and municipal governments through the new and green and climate financing. Integrated Devolution and Urban Support Program (KIDUSP, P177048, FY23), the ongoing trust-funded Kenya Accountable Devolution Program (KADP, P167841), and the planned follow-on Governance Improvement Project (FY24) mentioned above and the full range of operations supporting devolved functions in agriculture, health care, water supply, climate action, and early childhood development. 66 To help tackle corruption, the CPF program will mainstream interventions to build capacity of demand side organizations (building on citizen Digital technologies contribute to transpaency and accountability engagement and grievance redress mechanisms) Photo: World Bank and improve mechanisms for their interaction COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 19 with the public sector control frameworks . IFC will delivery system and improve climate resilience support the rollout of private sector codes of ethics of producers. The NAVCD (P176758) and DRIVE and the World Bank will deepen collaboration with (P176517) projects will help to accelerate smallholder development partners to agree and implement transition to commercial agriculture and livestock a more joined-up strategy on anti-corruption, production, respectively. IFC aims to support the building on the respective strengths of bilateral and recovery of agribusiness firms and expand modern multilateral actors. food production through pilot PPPs by investing in inputs and technology services, food processing, 67 Key outcomes for Objective 2 would be measured by the timeliness of public resource flows to the frontline, the improved transparency logistics and supply chains with backward integration to out-grower programs. Joint work is also planned to help create a unified food safety agency to advance of public procurement and improvements in county modern food systems in Kenya. government performance as measured by the Country Governance Scorecard index. 70 In the MSME sector, IFC will continue expanding its portfolio of over US$47 million in advisory services on SME banking and capacity building, agribusiness and health SMEs, access to finance for women, and business climate reform. IFC will also support digital entrepreneurship and innovation through support to local and regional startups. From the World Bank, the ongoing Kenya Industry and Entrepreneurship Project (KIEP, P161317) is also piloting interventions to spur innovation and productivity in SMEs, KYEOP (P151831) is providing vulnerable youth with training, apprenticeships and small business grants, and SAFER (P175017) is Jua Kali artisans at their workshop in Nairobi expanding liquidity and de-risking private finance Photo: Sambrian Mbaabu for MSMEs. The planned KIDUSP (P177048, FY23) will OBJECTIVE 3: FOSTER MSME AND SMALL PRODUCER provide capacity building for public private dialogue SUCCESS FOR FASTER JOB CREATION and PPPs and for MSME development at the county level. The Kenya Jobs and Economic Transformation 68 Objective 3 addresses Kenya’s need to accelerate quality job creation and capture its demographic dividend by focusing on labor Project (KJET, P179381, FY24) will target MSME clusters across Kenya’s regional economic blocks with larger, catalytic public investments while supporting broad market demand and supply. On the demand side, based actions to ease regulatory barriers, deepen the program will focus on improving the operating access to markets and expand business development environment for, and performance of, Kenya’s services for MSMEs development. Development small enterprises and small producers, including policy financing and macroeconomic technical reforms to level the playing field and strengthen assistance will include support for competition and domestic competition. On the supply side, the other reforms needed to achieve MSME and small program includes interventions to strengthen labor producer success. market outcomes for women, improve the school- 71 to-work transition for youth, and strengthen labor To advance women’s economic empowerment, intermediation services. the World Bank will prepare a new Women’s Economic Empowerment operation (FY24) while 69 In agriculture, the ongoing KCSAP (P154784), NARIG (P153349), ELRP (P173702) and KEMSFED (P163980) programs will continue to support IFC continues to build the capacity of private companies to address gender gaps, increase women’s representation in business leadership and productivity improvements, buildout the service unlock access for women-owned SMEs in value 20 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 chains and distribution networks, through its IFC and women producers, and greater mobilization of Sourcing2Equal Kenya program. This work will private capital into value chains with high potential complement the planned Kenya Gender Platform for job creation. (Box 4) that will ensure stronger portfolio-wide attention to gender equity. 72 On the labor supply side, the upcoming National Youth Opportunities Towards Advancement program (P179414, FY23) will build on KYEOP (P151831) interventions, including among refugee youth, to improve efficiency and significantly expand coverage of Kenya’s youth employment programs and maximize the sustainability of youth- owned enterprises. The planned KDEAP program (P170941, FY23) will support entities that provide A nurse with an elderly patient in Kakuma Hospital Photo: Tinseh digital training and connect youth to employment and income generation opportunities while IFC will support private initiatives in digital skills literacy and OBJECTIVE 4: SHRINK DISPARITIES IN LEARNING AND rapidly advance skills training in line with industry HEALTH OUTCOMES demands. The ongoing EASTRIP (P163399) and ACEII (P163399) operations will refocus on their relevance to the private sector, remaining gaps in quality, 74 Objective 4 builds on Kenya’s progress in human capital development by focusing the WBG program on shrinking spatial and other disparities, and reforms to increase efficiency in the tertiary education sector. improving service quality to secure better learning and health outcomes, and pursuing universal health 73 Outcomes for Objective 2 would be faster job care. In so doing, CPF implementation will reflect the growth among MSMEs outside Nairobi and views shared during consultations that the World Mombasa, increased share of farmers selling more Bank should move from information sharing and than half of their produce into the marketplace, training to livelihoods support focused on historically greater access to finance for women-owned firms marginalized communities. It will also explore ways to promote household climate resilience through education and by mitigating the effects of climate Box 4: The Kenya Gender Platform change on health caused by, among others, disease, While the WBG has made important contributions to food insecurity and malnutrition. advancing gender equity in Kenya (Annex 2), a more 75 systematic approach is necessary for greater impact. This In education, the WBG will support measures CPF will include a well-resourced Kenya Gender Platform to reduce disparities and improve learning covering operations, knowledge, and dialogue. The first outcomes in basic education (pre-school to pillar will focus on both narrowing select gaps through secondary). The World Bank will complete analytical key operations and ensuring equitable outcomes in all work supporting preparation of a Roadmap for operations. The second pillar will pursue specific analytical Better Early Childhood Development (P174257) to work to uncover the constraints facing Kenya’s women, be followed by an ECD operation to pilot county with a focus on women’s economic empowerment and level interventions. The new KPEELP (P176867) aims jobs. The third pillar will pursue a more robust dialogue to reduce gender disparities in schooling and sub- with the government, development partners, CSOs, national disparities in learning outcomes, including and the private sector to accelerate knowledge transfer, for refugee communities, while the ongoing build capacity, and support gender commitments of Secondary Education Quality Improvement Project mutual interest. (SEQIP, P160083) will continue expanding school infrastructure, reducing teacher shortages, targeting COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 21 scholarships for girls’ transition, and addressing GBV. sustainability and the need to green infrastructure The latter will be followed by a new operation (FY26) service provision in Kenya, to be covered in the in this CPF. The planned KDEAP (P170941, FY23) Country Climate and Development Report (CCDR) will invest in broadband connectivity for education currently under preparation. institutions. 76 In health care, the Bank will complete the ongoing Transforming Health Systems for 79 In the energy sector, the ongoing Kenya Off Grid Solar Project (P160009) and Kenya Electricity Modernization Program (P120014) will Universal Care Project (P153394) supporting quality complete grid and off grid electrification for more of service improvements and piloting Universal than 2 million people and help reduce distribution Health Coverage (UHC), and the COVID-19 Health losses while the ongoing Eastern Electricity Highway Emergency Response (P173820) projects. The Project (P126579) will complete the transmission planned Building Resilient and Responsive Health interconnection with Ethiopia and MIGA guarantees Systems (P179698, FY24) will shift financing further continue to support solar home system services for toward UHC by expanding reforms in universal health underserved communities across Africa, including care, service improvements in public health facilities, Kenya. The planned Kenya Expansion of Sustainable increasing financial protection through universal Access to Electricity Program (P176698, FY23) health insurance, and readying health services to will continue to support financial sustainability meet the demographic transition, particularly in non- and efficiency improvements and invest in the communicable diseases. IFC will support expanding electrification program. Subsequent phases will build private investment in healthcare services, vaccine and on the ongoing Renewable Energy Development pharmaceutical manufacturing, and health insurance. study (P173040), supporting competitive auctions for solar and wind power. IFC will continue to invest 77 Key outcomes of Objective 4 will be tracked by the Kenya UHC index, specific learning outcomes in the lowest performing quintile of in green energy generation in line with Kenya’s Least Cost Plan and in commercial loss reduction. IFC will also seek opportunities to help independent power counties and dropout rates for girls. producers convert plants to renewable energy or develop new green generation, and to help Kenya Live line engines supported by the Kenya unlock the power distribution beyond urban areas. Electricity Modernization Project Finally, IFC and the ongoing Infrastructure PPP Project Photo: Keziah Muthembwa (P121019) will continue to support preparation of future energy PPPs including two transmission lines and geothermal capacity. 80 In transport, the CPF program will promote more transport PPPs while reserving IDA financing for investments in rural roads, urban mobility, regional connectivity, and trunk roads that have a high impact on poverty, inequality, fragility and, where possible, promote greener mobility. The ongoing EARTTDF (P148853) and HoAGDP (P161305) projects will complete upgrading over 700 kilometers of regional OBJECTIVE 5: EXTEND SUSTAINABLE INFRASTRUCTURE corridors and related community infrastructure in SERVICES TO THE LAST MILE northern Kenya. Planned new Bank lending includes: a possible IDA partial risk project guarantee on the 78 Objective 5 focuses on extending infrastructure services through the last mile including remote rural communities and informal US$1.5 billion Nairobi-Nakuru-Mau Summit Toll Road (P165545, FY23) with IFC participating as an investor, and potential MIGA support as a guarantor; a planned urban settlements, with consideration for financial Kenya Urban Mobility Improvement Project (P176725, 22 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 FY23) to improve public transport and introduce will complement transport services with social green mobility in the Nairobi Metropolitan Area; and infrastructure in targeted underserved communities. a planned Rural Roads Program (FY25). IFC and MIGA The Bank will also support implementation of Kenya’s will endeavor to mobilize more private capital for 2021 Refugee Act which is looking at converting Kenya’s road sector, where MIGA is already providing refugee camps to formal local settlements. guarantees for investments under Kenya’s innovative Roads Annuity Program. The ongoing East Africa Freight Flow Logistics ASA (P178066) will inform possible reforms and potential investment options 83 Outcomes for Objective 5 will be tracked by new electricity connections, the population served by 3G+ mobile broadband coverage, Kenya’s including around Lake Victoria. Rural Access index and the number of urban informal settlements residents living in defined improved 81 In digital connectivity, the WBG will work jointly to expand affordable connectivity to underserved areas, position Kenya as a regional conditions. data hub, and explore opportunities to expand “green” digital services. The HoAGDP (P161305) and the EARTTDF (P148853) projects will complete installation of fiber optic cables in the NEDI region19 The planned KDEAP (FY23) will help to upgrade the national fiber optic backbone, close selected gaps in broadband access and promote private investments in digital infrastructure and services at last mile. IFC will seek to consolidate Kenya as a regional hub in the Cloud and Data Centers space, pursue last An elderly beneficiary of cash transfer displaying his Inua Jamii Card mile connectivity in rural areas and seek to invest Photo: Tinseh in green telco initiatives from power optimization in Data Centers to partnerships for mobile towers and smartphones recycling. The WBG will also work OBJECTIVE 6: INCREASE HOUSEHOLD RESILIENCE AND jointly on strengthening the regulatory environment NATIONAL PREPAREDNESS FOR SHOCKS in digital market competition, data protection, cybersecurity and ecommerce through technical work and the planned Eastern Africa Regional Digital Market Integration Project Program (P176181, FY23). 84 Objective 6 focuses on reducing household vulnerabilities to a range of shocks, while also strengthening national systems for disaster preparedness and climate resilience. Increasing 82 In urban development, the ongoing Kenya Informal Settlements Improvement Program II (KISIP2, P167814) continues infrastructure coverage and sustained resourcing of safety nets, social insurance and risk financing will be a key consideration. improvements, tenure regularization and institutional capacity for slum upgrading across Kenya. The planned KIDUSP will support infrastructure investments in secondary cities and towns while 85 In social protection, the ongoing Kenya Social and Economic Inclusion Program (P164654) is supporting Kenya’s cash transfer programs to strengthening links between urban planning and add social and economic services to help poor financing. Following the successful WBG collaboration households promote ECD and move toward self- under the Affordable Housing program, IFC will sufficiency while also creating a national social provide transaction advisory services to develop a registry covering 50 percent of Kenya’s most pilot PPP affordable housing project. The planned vulnerable. Improved social protection also enables Kenya Urban Mobility Improvement Project (P176725) individuals to invest in developing skills to move from low to higher productivity jobs. A follow-on Along the Isiolo-Mandera and the Eldoret-Nadapal regional road 19 operation (FY25) would aim to help Kenya achieve corridors. COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 23 more consistent financing, better coverage, deeper adequacy, and greater shock responsiveness of its safety nets, expand ‘cash-plus’ initiatives and broaden coverage of poor children. The upcoming Youth Resilience and Employment Opportunities program (FY23) also aims to improve the efficiency, governance and transparency of the NSSF and, together with insurance sector reform support under SAFER (P175017), pursue expansion of social insurance to informal sector workers. 86 In disaster preparedness and response, the Water Kiosk Photo: World Bank World Bank will build on a recent analysis of disaster spending in the FY22 Public Expenditure OBJECTIVE 7: REDUCE KENYA’S WATER INSECURITY Review and reforms under the recently closed Catastrophe Deferred Drawdown Operation (P161562) to continue work on: (i) pandemic preparedness through a new regional operation 89 The CPF program will work upstream to help stem degradation of Kenya’s natural assets and reduce vulnerabilities to extreme weather (FY23); (ii) strengthening urban resilience in Kenya’s events, and downstream to increase water supply secondary cities under the upcoming KIDUSP (FY23); and sanitation services. The planned CCDR (FY23) (iii) livestock insurance under the DRIVE (P176517) will help Kenya prioritize actions to achieve its project; (iv) national and regional surveillance and NDCs to the Paris Climate Agreement and will controls for pest management under the ELRP be supplemented by analytical work to expand (P173702); (v) modernization of hydro-meteorological PPPs in biodiversity conservation and strengthen services under the ongoing KCSAP (P154784); and (vi) governance for protecting forests. A planned tackling environmental hazards in urban slums under Watershed Restoration Project (FY24) will help KISIP2 (P167814). communities restore and protect selected water towers and watersheds and improve Kenya’s systems 87 To help address the impacts of climate change more generally: the World Bank will complete a CCDR for Kenya in FY23 to inform policies needed for monitoring landscape areas. The World Bank will also explore how communities and governments can collaborate to produce economic and environmental to, inter alia, climate proof public investments; the co-benefits through better natural resource ongoing FLLOCA (P173065) is helping build the management. Downstream, the CPF will: complete country’s capacity to plan, monitor and implement the bulk water supply for Mombasa and Kwale under Climate Action Plans and investments to build the Coastal Water Security and Climate Resilience community level climate resilience in all counties; and Project (P145559); strengthen water distribution and the Bank will continue support for Kenyan issuance utilities under the Water and Sanitation Development of sovereign green bonds and mobilization of other Project (P156634); complete a largescale irrigation forms of climate finance. scheme under the Kenya Water Security and Climate Resilience Project (P117635); build on IFC’s East 88 Key outcomes for Objective 6 will be tracked by the population covered by effective safety nets and/or social insurance, the number of small Africa Smallholder Irrigation Program to develop investment opportunities for equipment suppliers, farmer groups, off-takers and banks; and introduce producers with access to risk financial services and share investments in farmer-led irrigation under NAVCD of urban areas with risk sensitive development plans, (see paragraph 69). Additional investments in water and later by a new County Climate Resilience index. storage and supply will be extended in the upcoming 24 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 Water, Sanitation and Hygiene program (FY24) and Program evolution, performance, and implementation 92 a planned urban water and sanitation operation Kenya’s IDA/IBRD portfolio grew by over 50 in FY25. The Groundwater Management for Horn percent in commitments from the beginning of Africa Project (P174867) will invest in accessing of IDA17, increasing in both number and average domestic aquifers in Kenya’s NEDI regions and, in a size of operations, to peak at 35 active IDA/ later phase, shared aquifers in the Horn. IBRD projects in FY18 and at commitments of US$6.6 billion (excluding DPFs). A strong portfolio 90 Outcomes for Objective 7 will be tracked by increases in Kenya’s water storage capacity, household access to improved drinking water and consolidation effort has taken place since FY20 (see Table 1) reflecting the CLR lesson on volume and depth of operations versus breadth of interventions water for productive use, and hectares of land under and supported by the resumption of DPFs. This sustainable land and water management practices. consolidation provides an important opportunity to refocus investments in this CPF toward a more E. Implementing the CPF Program transformational array of operations. The expected 91 The CPF will span two IDA cycles: IDA20 (FY23- FY25) and IDA21 (FY26-FY28). Given Kenya’s blend status20, World Bank financing will comprise evolution of the Bank lending pipeline for FY23-FY25 is detailed in Annex 3. 93 IDA and IBRD resources. Financing will be provided Collaboration with IFC and MIGA continues in ways that align to Kenya’s stated development to grow beyond the traditional focus on priorities, are consistent with the SDFP, and support infrastructure finance and investment climate. Kenya’s objective to move, over time, toward Low risk The portfolio is already moving towards several new of debt distress. Specific amounts will be determined areas, including agriculture, health, tourism, and during project negotiation, based on support from MSMEs, spurred by Kenya’s need to mobilize private other development partners, WBG comparative capital. The WBG will continue to employ all funding advantage, and factors affecting IBRD’s financial modalities in Kenya (including trust funds) and capacity, including global economic developments deepen synergies between World Bank ASA and IFC and demand from other borrowers. Kenya’s IDA19 advisory programs. program is fully delivered with the indicative program for IDA20 (Annex 3) expected to leverage IDA20’s window for regional integration, the WHR, and short-term maturity loans. The IDA21 program 94 The previous CPS development outcome was rated Moderately Satisfactory (Annex 2), in part due to systemic issues that continue to will be set out in the FY25 PLR. The CPF ASA program challenge World Bank project implementation. The will include a CCDR, Poverty Assessment, and Human most critical are: (i) misalignment between budget Capital Review in FY23. allocations and project work programs; (ii) delayed TABLE 1: Kenya IBRD/IDA Portfolio Performance IDA17 IDA18 IDA19 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Commitments (US$ billion) * 4.5 5.4 5.3 6.1 6.6 6.6 5.5 6.0 6.3 No. of operations 24 29 30 30 35 34 33 32 32 Average size (US$ million) 188 186 177 203 189 194 167 188 191 Disbursement ratio (%) ** 18.6 21.9 12.1 18.8 16.2 17.1 22.1 20.6 17.7 Amt disbursed in FY (US$ billion) * n.a. n.a. n.a. n.a. 0.50 0.55 0.93 0.64 0.58 Problem projects (% value) n.a. n.a. n.a. n.a. 13.3 26.6 10.0 16.0 9.0 * Excluding DPF, and Trust Funds co-financing ** Includes IPFs and Program for Results financed by IBRD financing, national Performance-Based Allocations and IDA windows Given the ongoing improvements in debt policy, strategy and 20 management (including under the SDFP) Kenya should be able to retain its blend status and access to IBRD resources. COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 25 transfers to national ministries and county agencies; in accounting, budgeting, internal control, funds (iii) weak institutional and intergovernmental flow, financial reporting and external audit which coordination; (iv) protracted procurement processes; are in turn supported under the GESDEK and TA and (v) delays in land acquisition, particularly programs. The recently closed Kenya Devolution community lands. These issues are being addressed Support and upcoming KIDUSP programs finance through policy reforms and capacity building. and incentivize capacity building in PFM at the GESDEK is strengthening Kenya’s budget process with county level while counties are creating single new legislation enacted to accelerate fiscal transfers fiduciary units that span World Bank and possibly to the counties. The resumption of DPFs has created other development partner-financed operations. a new national platform for policy coordination, and The World Bank’s Integrity Vice-Presidency (INT ) Kenya is reinforcing its framework for operational continues to help build anti-corruption capacities coordination cascading from Cabinet through line in selected implementing agencies. Continued close ministries to county governments. As the Kenyan monitoring and capacity building, particularly at polity relies on relationships that overlay bureaucratic the county level, should mitigate residual risks, and processes (which can affect implementation), permit a gradual expansion of PforR operations with the World Bank will also mainstream sector-wide appropriate fiduciary reform measures. governance and institutional assessments to understand better political economy realities during project preparation. An ongoing engagement with the National Land Commission, supported by several 96 Environmental and social (E&S) risk management and safeguard/standards compliance has improved somewhat but requires projects, will contribute to increasing the efficiency further strengthening at the county level and better of land acquisition. management of occupation health and safety risks.21 Close monitoring and gradual improvements 95 Fiduciary compliance remains generally robust with exceptions in a few sectors and some challenges at the county level. World Bank- to grievance redress mechanisms is also yielding better performance results, although a few projects have closed with outstanding compliance issues. The financed projects use Kenya’s national PFM systems CPF program will continue to support safeguards Potato farming Photo: GoK Kenya continues to be an outlier on preventable project-related 21 accidents and fatalities. 26 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 compliance by strengthening social risk management Measurement, monitoring, and learning 100 across the government and project implementers. The CLR for the previous CPS (FY14-FY20) IFC will also expand advisory services to its clients on called for more attention to monitoring, E&S performance standards. evaluation and learning to inform CPF course corrections. This CPF will therefore introduce a Partnerships program-wide approach to data adequacy, quality 97 The WBG will continue to play a leading role in high-level policy dialogue between development partners and the Government of and transparency building on support to Kenya’s statistical system under the recently closed Kenya Statistics Project (P149718). The upcoming Eastern Kenya. Periodic meetings between the government Africa Regional Statistics (P176371), Kenya Digital and the Development Partners Heads of Mission Economic Acceleration (FY23), and Governance Group, currently co-chaired by the World Bank and the Improvement (FY24) operations will provide further government, are at the apex of Kenya’s development support for consolidating Kenya’s data platforms coordination framework. The World Bank also actively and information systems. This approach will: (a) participates in (if not co-chairs) several Sector mainstream the use of high frequency data, improved Working Groups many of which include domestic and administrative data and available ‘big data’ into World international civil society partners. Particularly strong Bank-supported operational design, learning and areas of multi-donor partnership include agriculture, outcome monitoring; (b) apply mapping tools, such health, safety nets, transport, electricity, devolution as the Geo-Enabling initiative for Monitoring and and PFM (see Annex 6) and, most recently, support Supervision and the new Project Targeting Index, for refugees and host communities. across the portfolio to enhance geographic and spatial synergies (e.g., matching electricity access 98 The WBG will continue to work closely with the International Monetary Fund (IMF). In April 2021, the IMF approved a 38-month program for subprojects with value chain investments); and (c) include appropriate data literacy capacity building for demand-side agents in each operation (see Kenya22 supporting fiscal consolidation and economic paragraph 66). recovery. Alignment with the recent DPF series has been strong, and this CPF program will continue to coordinate with the Fund on macroeconomic and selected structural policies. 101 The new CPF monitoring framework would introduce: (a) an annual tripartite event involving government, civil society and development partners to reflect on Kenya’s overall 99 As a rising middle income client, the WBG CPF program for Kenya will also explore the range of co-financing opportunities available progress toward the HLOs and CPF implementation; (b) biannual consultations with CSOs and media; and (c) operational level frameworks, such as a through deeper coordination with larger bilateral new NEDI Communication Strategy, that engage and multilateral development banks in the semi- local stakeholders on project implementation and concessional financing space. Finally, the Bank will deepen compliance with both Kenya’s constitutional continue to expand partnerships with Kenya’s leading requirement for participation and the World Bank’s think tanks and vibrant CSOs on both national and requirements for citizen engagement. regional issues. A US$2.34 billion program under its Extended Credit Facility and 22 Extended Fund Facility. COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 27 Customer paying for grocery in Ngong market Photo: Sambrian Mbaabu IV. MANAGING RISKS TO THE CPF PROGRAM 102 The overall risk to achieving the CPF objectives and their substantial contributions to the HLOs is assessed as Substantial 103 Political and governance risk is assessed as Substantial. While the overall political climate continues to improve with the implementation of (Table 2). In particular, the level of political and the 2010 Constitution, Kenya’s diffuse power bases governance, macroeconomic, fiduciary, and social and dynamic coalitions challenge efficient cross- risks are all assessed as Substantial. government coordination, greater international Table 2: Systematic Operations Risk Rating Tool competitiveness, efforts to tackle corruption, and Risk Category Rating better resource allocation for improved service 1. Political and Governance Substantial delivery (all critical to the CPF). Devolution has the 2. Macroeconomic Substantial potential to surmount some of these challenges, but 3. Sector strategies and policies Moderate also faces risks from an evolving center-periphery 4. Technical design of project Moderate political settlement and the potential replication 5. Institutional capacity for implementation Moderate of corruption at local levels. To mitigate these risks, and sustainability the CPF program will support emerging national 6. Fiduciary Substantial platforms for policy reform and coordination, 7. Environment and social Substantial strengthen the intergovernmental fiscal framework, 8. Stakeholders Moderate county government capacities, and help increase the Overall Substantial beneficiary incidence of public spending with efforts to strengthen demand for accountability. 28 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 104 Macroeconomic risk is assessed as Substantial. Although Kenya’s medium-term economic prospects remain good, the broad political 106 Environmental and social risks are assessed as Substantial (social risks are Substantial and environmental risks are Moderate). commitment to fiscal consolidation and reducing Resource competition, environmental stresses and the risk profile of Kenya’s external debt could be weaker institutions in Kenya’s north and northeast jeopardized by continued turbulence in the global continue to spur social conflicts that delay project economy. Sustained and intense fiscal pressures implementation. Resource competition in some water could delay efforts to rebuild fiscal buffers and divert tower communities interrupted past World Bank attention from necessary structural reforms and MSME supported projects. Kenya also faces risks of cross- investments, while rising food prices and related border spillovers from conflicts and environmental shortages raise the potential for unrest. To mitigate stressors across the Horn of Africa. To mitigate these these risks, the CPF program will continue DPFs to risks, the WBG will draw on its ministerial-level provide a fiscal cushion to protect social spending convening power through the HoAI, the growing and sustain the reform effort, in collaboration with number of regional operations and its use of related the IMF and underpinned by analytical work. Other relevant windows (e.g., the WHR). The CPF will also financing operations will be strictly embedded in invest heavily in water security and livestock value Kenya’s own medium term expenditure framework. chains, roll out investments under the IDA20 WHR and expand payments for environmental services. To 105 Fiduciary risk is assessed as Substantial. To mitigate this risk, the WBG will continue to support improvements in Kenya’s national mitigate social risks, the CPF will strengthen citizen and beneficiary engagements across the portfolio and continue to build social risk management capacities and local fiduciary systems with a focus on across national and local governments. The World strengthening the internal and external control Bank anticipates an increase in grievance reporting; framework and deepening transparency, including while this may be interpreted as rising social risks, it at the beneficiary and service delivery levels, and reflects a trend towards greater accountability that employing preventative measures (including robust can help drive more beneficiary-centered public engagement with INT ) across the portfolio and in spending in Kenya. identified corruption hotspots. 140MW geothermal power plant in Olkaria supported under the Kenya Electricity Expansion Project Photo: Keziah Muthembwa COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 29 30 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 Annex 1: Kenya CPF FY23–FY28 Results Matrix High Level Outcome 1 (HLO 1) – FASTER AND MORE EQUITABLE LABOR PRODUCTIVTY AND INCOME GROWTH Indicators Data source(s) & frequency Current value Benchmark National Accounts - Kenya Private investment as a share National Bureau of Statistics 12.8 percent (2017-19) 19.7 percent (MIC avg. 2017-19) of GDP (KNBS) Output per worker (GDP US$12,473 or 50 percent increase International Labour constant 2017 international US$10,181 (2021) over pre-COVID avg 2015-19 of Organization (ILO) US$ at PPP) 3.4 percent growth per year Gini inequality index 38-40 (2019) KNBS Youth not in education, 16.9 percent (2021) employment or training High Level Outcome 2 (HLO 2) – GREATER EQUITY IN SERVICE DELIVERY OUTCOMES Indicators Data source(s) & frequency Current value Benchmark Ratio of the average of 1 and st KNBS and DHS 2nd quintile to the 5th quintile 0.79 (2015/16 (every 5 years) county Human Capital Indices On-grid: Admin data on metered Share of population with connections from KPLC (annual) access to electricity (grid & 75 percent (2021) 100 percent off-grid) Off-grid: Energy & Petroleum Regulatory Authority (annual) Increased social safety net State Department for Social 0.4 percent of GDP 1.4 percent (LMIC avg) financing Protection High Level Outcome 3 (HLO 3) – GREATER RESILIENCE AND SUSTAINABILITY OF KENYA’S NATURAL CAPITAL Indicators Data source(s) & frequency Current value Benchmark Kenya Water Resource Authority Water productivity US$14.4 per m3 US$25 per m3 (LMIC) (annual) Share of land area Kenya Forest Service (annual) 7.2 percent (2019) 12 percent (2030) NDC target under forest cover Food and Agricultural Prevalence of severe food Organization (FAO) (3 year 25.7 percent (2018–20) insecurity in the population moving average) COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 31 CPF Objective 1: Boost fiscal and debt sustainability CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 1.1: Joint DSA Risk of Debt Distress SPI 1.1: Implementation of new debt Ongoing financing: Baseline [2021]: High management rules pegging to debt ceiling IDA/IBRD: Accelerating Reforms for an Target [2027]: Moderate to 55 percent of GDP Inclusive & Resilient Recovery DPF 2 Source: Debt Sustainability Analysis (DSA) Baseline [2021]: 62 percent (P176903), Program to Strengthen Gov Target [2027]: 52 percent for Enabling Service Delivery and Public COI 1.2: Volume of sovereign and corporate Source: DSA Investment in Kenya (GESDEK, P161387), green bond issuances Kenya Infrastructure Finance/PPP (P121019), SP1 1.2: Performance-based incentive Affordable Housing (P165034) Baseline (2021): 0 Target (2027): US$1 billion framework developed for Kenya’s private sector-led Special Economic Zones program Financing pipeline: Source: Central Bank of Kenya and National IDA/IBRD: Development Policy Financing, Treasury Debt & Resource Mobilization SPI 1.3: Green Industrialization Policy Long-term Fin for PPP/ Nairobi-Nakuru Toll Directorate adopted Road Gu (P165545), Integrated Devolution & Urban Support Program (P177048), COI 1.3: Volume and number of PPP’s SPI 1.4: New Investment Promotion act Governance Improvement (FY23/24) mobilized with WBG financial/TA support passed to underpin a comprehensive Baseline (2021): 0 Ongoing AS/A: upgrade of investment facilitation services, Target (2027): US$2.5 billion, 50 transactions Public Expenditure Review (P175146), including at the county level Source: National Treasury PPP Directorate Country Economic Memorandum (P177156), Macro Fiscal Programmatic ASA (PASA) (P162368), Joint Capital Market Program (P603143), IFC Investment Climate AS (P603298), Subnational Competitiveness for JET (P176821), Kenya Trade Integration (P172285) ASA Pipeline: Kenya Economic Updates (biannual), CORE ASA Public Expenditure Review (FY26), CORE ASA Country Economic Memorandum (FY25) 32 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 CPF Objective 2: Improve Public Expenditure Transparency and Effectiveness CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 2.1: Share of approved estimates with SPI 2.1: Budget costing and cash Ongoing Financing: results costed in the improved budget management frameworks adopted at the Program to Strengthen Governance for costing framework (BCF) that have been national and county governments Enabling Service Delivery and Public disbursed to counties on time (as defined Baseline [2021]: No Investment in Kenya (P161387), Kenya by PFM Act and regulations) Target [2027]: Yes Accountable Devolution Program (P160017) Baseline [2024]: to be measured in Aug 2024 Source: NT Memo Financing Pipeline: Integrated Devolution when BCF is rolled out to MCDAs and Urban Support Program (P177048), Target [2027]: 60 percent SPI 2.2: Percentage of the number of Digital Economy Acceleration Project Source: Hyperion and Integrated Financial public investments effectively selected, (P170941) Management Information System (IFMIS) implemented, and monitored in line with PIM regulations/guidelines Ongoing ASA: COI 2.2: Proportion of public procurement Macro Fiscal Programmatic ASA (P162368), Baseline [2021]: 0 value conducted by MDAs, state Kenya Public Sector Improvement (P174306), Target [2027]: 75 corporations and counties in a timely and Kenya Devolution Dialogue (2099094) Source: Public Investment Management efficient manner using Information System (PIMIS) e-procurement systems ASA Pipeline: CORE ASA Public Expenditure Review Baseline [2021]: 0 SPI 2.3: Share of MCDAs and County (FY26), Macro Fiscal Programming PASA Target [2027]: 100 percent Governments implementing (P178884), Public Expenditure and Financial Source: PFM Reform Strategy Reports, e-Govt e-procurement system Accountability Report (FY27) Procurement system Baseline [2021]: 0 percent Target [2027]: 75 percent COI 2.3: Percentage increase in Source: PFM Reform Strategy Reports performance on newly developed County Governance Scorecard Index (CGSI) SSPI 2.4: Joint development partner Baseline [2021]: to be measured when CGSI anticorruption strategy adopted is developed (see SPI 2.4) Baseline [2021]: No Target [2027]: 25 percent point increase over Target [2027]: Yes first year measurement Source: Governance Development Partner Source: Ministry of Devolution Annual Working Group Minutes Reports Lake Victoria wetlands Photo: World Bank COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 33 Objective 3: Foster MSME and Small Producer Success for Faster Job Creation CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 3.1: Average annual net private, non- SPI 3.1: Number of jobs created Ongoing Financing: self-employed, non-agriculture, full-time for vulnerable youth (to be gender IDA/IBRD: Nat Agricultural & Rural Inclusive equivalent (FTE) job growth, outside disaggregated) Growth Project (P153349), Kenya Climate Nairobi and Mombasa Smart Agriculture Project (P154784), National Baseline [2021]: 110,000 direct Agriculture Value Chain Development Project Baseline [2015-19]: 270,000 beneficiaries (P176758), De Risking, Inclusion & Value Target [2026-27]: 300,000 (10 percent Target [2027]: 250,000 direct Enhancement (DRIVE) (P176517), Kenya Marine increase) beneficiaries Fisheries Economic Development (P163980), Source: Kenya Labor Force Surveys Source: KYEOP and successor operation Kenya Industry and Entrepreneurship (P161317) Kenya Youth Employment and Opportunities (P151831), Supporting Access to Finance and COI 3.2: Numbers of additional farmers SPI 3.2 Yields per hectare for key Enterprise Recovery (P175017), Kenya Affordable and pastoralists selling more than 50 agriculture value chains (potato, Housing Finance Project (P165034), East Africa percent of output in the marketplace tomato, coffee) Skills for Transformation & Reg Integration Project Baseline [2022]: 0 Baseline [2022]: Baseline expected by (P163399), Eastern & Southern Africa Higher Target [2027]: 600,000 or 50 percent of Dec 2022 from ongoing Agricultural Ed Centers of Excellence (P151847), Improved Livelihood for Communities in Meru (P163035) 1.2 million farmers in project-supported Census agriculture services delivery system and Target [2027]: 25 percent increase IFC: KTDA ICD (41498), BOAK SME RSF (46437), database Source: Project surveys and AMEF-P1 COOP KN (45046), Co-op Bank III Source: Ministry of Agriculture, Livestock Agricultural Censuses (2022, 2027) (41133), Equity Bank II (38419), WCS COVID GTBK and Fisheries project surveys (44972), KCB Group TierII (36791), NIC Bank Kenya SPI 3.3: Number of women owned (35372), Twiga Foods RSF (43108), Suguna III K COI 3.3: Percentage of formal firms with 5 MSMEs, women producers (crop, fish, (44038), BP Kenya (23826), Twiga Foods (41195) or more employees who have at least one livestock) & female agri-preneurs Financing Pipeline: woman-owner with an open credit line. receiving direct financial support Kenya Integrated Devolution and Urban Support This indicator will be broadened to include (grants or credit) through WBG Program (P177048), Kenya Digital Economy micro enterprises as data improves operations Acceleration Project (P170941), National Youth Baseline [2018]: 37 percent Baseline [2022]: 0 Opportunities Towards Advancement (P179414), Target [2027]: 47 percent Target [2027]: 550,000 Women’s Economic Empowerment (FY24), Jobs and Economic Transformation (FY24) Source: World Bank Enterprise Surveys, Source: World Bank operations Findex, Central Bank of Kenya FSD Ongoing ASA: SPI 3.4: Public sector Credit Risk IDA/IBRD: Kenya Economic Update (biannual); COI 3.4: Value of private capital mobilized Guarantee Scheme transitioned to Job Creation & Entrepreneurship among by WBG operations into value chains with an independent Credit Guarantee Youths in Kenya: Impact Evaluations (P164229), high potential for job creation Company capitalized in part by the Interventions to Foster Employment of Refugees private sector & Host Communities in Kenya: A Feasibility Study Baseline [2022]: US$0 (P173814), Kenya Subnational Competitiveness Target [2027]: US$100 million for JET (P176821); Land & Housing Eng (2099090), Sources: WB project and IFC investment SPI 3.5: Number of national Kenya Trade Integration (P172285), Agriculture reports competition policy actions introduced Sector Reforms (P172378) that address restrictions in agriculture, construction, pharmaceuticals, IFC: APA Women’s Insurance (606514), Coop telecoms, insurance, and professional CIBD and SCF Advisory Services Co-operative services Bank of Kenya (603453), Equity Bank (Kenya) Limited (603469), KTDA Advisory Services Program (600248), Seedstars World (604163), Sourcing2Equal Kenya (604788), Stanbic Bank Kenya (603403), Twiga Advisory (605442), Kenya Investment Climate Project 3 (603298), Kenya Investment Generation Project II (603316), Kakuma Kalobeyei Challenge Fund for Refugees and Host Communities in Kenya (603725) ASA Pipeline: Competition Policy Diagnostics (FY22), Women’s Empowerment Diagnostic (FY23), Kenya Economic Update (biannual) 34 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 CPF Objective 4: Shrink Disparities in Learning and Health Outcomes CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 4.1: Universal Health Service Coverage SPI 4.1: Percentage of population with Ongoing financing: Index insurance coverage under the National IDA: Transforming Health Systems for Baseline [2019]: 56 Health Insurance Fund Universal Care (P152394) Target [2027]: 74 [2 percent improvement Baseline [2018]: 19.9 percent COVID-19 Health Emergency Response per year based on past performance] Target [2027]: 40 percent Project (P173820) Source: Kenya Demographic and Health Source: National Health Accounts or Secondary Education Quality Improvement Survey, Kenya Harmonized Health Facility KNBS Household Health Expenditure and Project (P160083) Assessment, Kenya Household Health Utilization Survey Social and Economic Inclusion Project Expenditure and Utilization Survey (P164654) SPI 4.2: Revision of student’s capitation Primary Education Equity in Learning COI 4:2: Average share of students grants formula and amount per learner to Program (P176867) achieving higher order proficiency levels accommodate geographic specificities Development Policy Financing in Grade 3 in lowest performing quintile of counties SPI 4.3: Policy, strategy, and IFC: ISO Health (35077); AMEF-P1 COOP KN costed implementation plan for an (45046) Baseline [2021]: 20 percent Target [2027]: 50 percent intergovernmental quality framework for Pre-Primary Education approved Financing pipeline: Source: National Assessment System for Building Resilient and Responsive Health Monitoring Learner Achievement SPI 4.5: Number of government programs Systems (P179698) informed by the national social registry for Early Childhood Development (FY24) COI 4.3: Share of girls who drop out in pro-poor spending and equity Social and Economic Inclusion 2 (FY25) Primary and Junior Secondary (at grades 6, Secondary Education 2 (FY25) 7, 8 and 9) Baseline [2021]: 1 (HSNP) Baseline [2015]: 11 percent (to be revised Target [2027]: at least the four (4) existing Ongoing ASA: with 2019 KCHS data once released or 2023 safety net programs, up to all government IDA: Kenya Health Systems Strengthening KIPS) programs that target the poor – school for UHC (P177596), Roadmap for Better Early Target [2027]: 50 percent reduction feeding, youth programs Childhood ASA (P174257), Social Protection Source: Kenya Continuous Household Source: Social Protection Secretariat and Jobs ASA (P175941), Gender Platform Survey, KNBS (2106189), Poverty Assessment (P177353) IFC: Africa Medical Equipment Facility (605814); TechEmerge Health East Africa (604737) ASA pipeline: CORE ASA Equity in Human Capital (FY23), Women’s Empowerment Diagnostic (2106189), Education Programmatic ASA Refugees learn new skill Photo: IFC COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 35 CPF Objective 5: Extend infrastructure services to the last mile CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 5.1: Number of new grid and off-grid SPI 5.1: Electricity sector revenue shortfall Ongoing financing: connections added Baseline [2021]: 25 percent IDA: Off-grid Solar Access Project for Baseline [2021]: 30,000 Target [2027]: 15 percent Underserved Counties (P160009), Electricity Target [2027]: 270,000 Source: KPLC Financial Model Modernization Project (P120014), Eastern Source: KPLC Project Progress Report Electricity Highway 1st Phase of EA Power SPI 5.2: Kilometers of existing Fiber Integration (P126579), Horn of Africa COI 5.2: Percentage of population served Backbone Infrastructure upgraded, Gateway Development Project (P161305), with mobile broadband coverage (3G +) rehabilitated, and/or extended EA Regional Transport, Trade Dev Facilitation - 2nd Phase (P148853), Kenya Urban Support Baseline [2021]: 94 Baseline [2021]: 0 km Program (P156777), Second Kenya Informal Target [2027]: 98 Target [2027]: 6,000 km Settlements Improvement Project (P167814) Source: Communications Authority Source: National ICT Authority of Kenya of Kenya IFC: Atlas Tower Kenya (45720); Thika IPP SPI 5.3: Rural Roads Investment Program (29801) COI 5.3: Rural Access Index developed with targets and financing Baseline [2021]: 70 sources identified Financing pipeline: Target [2027]: 80 Integrated Devolution and Urban Support Source: Kenya Rural Roads Authority SPI 5.4: Number of County Integrated Program (P177048), Digital Economy Development Plans prepared and adopted Acceleration Project (P170941), Expansion COI 5.4: Increase in people living in urban Baseline (2021): 0 of Sustainable Access to Electricity Program informal settlements provided with Target (2027): 20 (P176698), Urban Mobility Improvement improved living conditions (household Source: Council of Governors Urban Project (P176725), Rural Roads (FY24) connections to safe water/sanitation, Committee roads, drainage & security lights) Ongoing ASA: Baseline [2021]: 0 IDA/IBRD: Renewable Energy (P174257), Target [2027]: 2.5 million Freight Flow & Logistics (P178106), Land Source: State Department of Housing and & Housing Engagement (2099090), Urban Urban Development, Informal Settlements Policy Dialogue (P177737) Database IFC: Private participation in 220kV Tx - Kenya Deep Dive (606335); Wananchi - East Africa Connectivity Services Market Study (605082) ASA Pipeline: CORE ASA Poverty Assessment (P177353), IFC Transmission Line AS A section of the Marsabit-Turbi road in Marsabit County Photo: KENHA 36 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 CPF Objective 6: Increase Household Resilience to, and National Preparedness for, Shocks CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 6.1: Percentage of population covered SPI 6.1: Hunger Safety Net Program Ongoing financing: by safety net programs or social insurance coverage IDA: Social and Economic Inclusion Project Baseline [2021]: 13.1 percent Baseline [2021]: 100,000 regular households (P164654), Emergency Locust Response Target [2027]: 30 percent in 4 counties (up to 300,000 households in Program (P173702), National Agricultural & Source: State Department of Social emergencies) Rural Inclusive Growth Project (P153349), Protection, Population Census, Retirement Target [2027]: 135,000 regular households in Climate Smart Agriculture Project (P154784), Benefits Authority 8 counties (to be updated at PLR) National Agricultural Value Chain Dev Project Source: National Drought Management (P176758), De Risking, Inclusion & Value COI 6.2: Number of producers (crop, Agency Enhancement (P176517), Marine Fisheries livestock, fish) accessing risk financial Economic Devt (P163980), Second Kenya services including saving accounts, digital SPI 6.2: Pandemic preparedness: Joint Informal Settlements Improvement Project accounts and/or insurance External Evaluation of International Health (P167814), Financing Locally Led Climate Regulations score Action Program (P173065), Covid-19 Health Baseline [2022]: 0 Emergency Response Project (P173820) Target [2027]: 425,000 Baseline [2021]: 57 Source: World Bank operations Target [2027]: 65 Financing pipeline: Source: Joint External Evaluation Kenya Integrated Devolution and Urban COI 6.3: Percentage of urban areas (cities International Health Regulations Support Program (P177048) and municipalities) with risk-sensitive Kenya Urban Mobility Improvement Project Integrated Urban Development Plans, SPI 6.3: Percentage of counties that have (P176725), including for informal settlements prepared Climate Risk Action Plans and set RI Pandemic Preparedness (FY23) Baseline [2022]: 0 targets for County Resilience Index (to be National Youth Opportunities Towards Target [2027]: 50 of 63 municipalities developed) Advancement (P179141) Source: Council of Governors Urban Baseline [2021]: 0 Kenya Social and Economic Inclusion Project Committee Target [2027]: 70 percent (FY25) Source: Ministry of Environment, Council of Governors, and County Governments Ongoing ASA: Social Protection and Jobs in Kenya (P175941), Kenya: Strengthening Natural Capital and Climate Policy Governance (P177097), Renewable Energy Development and Institutional Strengthening for Kenya (P173040), E-mobility study TA under HoAGP ASA pipeline: CORE ASA CCDR (FY23) Buhani Community Water Project: a Vihiga County Climate Change Investment Photo: Vihiga County Communications COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028 37 CPF Objective 7: Reduce Kenya’s Water Insecurity CPF Objective Indicators Supplementary Progress Indicators WBG Program COI 7.1: Increase in water storage (million SPI 7.1: Water sector policies and regulations Ongoing Financing: cubic meters) adopted Water and Sanitation Development Project Baseline [2021]: 0 Baseline [2022]: 0 (P156634), Target [2027]: 140 Target [2027]: At least 4, which could include Kenya Water Security and Climate Resilience Source: Water Resources Authority Groundwater strategy, Transboundary Water (P117635), Policy, individual county Water Acts Coastal Region Water Security & Climate COI 7.2: Increase in number of people Source: Ministry of Water, Sanitation, and Resilience (P145559), provided with access to improved drinking Irrigation Horn of Africa - Ground Water for Resilience water sources (Number) through WBG Project (P174867), National Agriculture Value operations SPI 7.2: Number of rural water schemes Chain Development Project (P176758), constructed or rehabilitated and functional, Financing Locally Led Climate Action Program Baseline [2021]: 0 under WBG operations (P173065), Target [2027]: 5.8 million Devt Response to Displacement Impact Project Source: World Bank operations Baseline [2022]: 0 (P161067), Target [2027]: 2500 Second Kenya Informal Settlements Imp Project COI 7.3: Number of people gaining access to Source: World Bank operations (P167814) water for productive use, including farmers with access to irrigation services through SPI 7.3: Hectares (ha) provided with new/ improved irrigation or drainage services Financing Pipeline: schemes or matching grants, through WBG Kenya Watershed Services Improvement operations Baseline [2022]: 0 Program (P178850), Baseline [2022]: 0 Target [2027]: 22,385 ha Kenya Water, Sanitation and Hygiene Program Target [2027]: 1 million Source: World Bank operations (P179012), Source: World Bank operations Urban Water and Sanitation (FY25) SPI 7.4: Share of sub catchment areas with COI 7.4: Increase in hectares (ha) of management plans developed by Water Ongoing ASA: land under sustainable land and water Resources Users Associations Global Water PER (P712944), management practices, through WBG Baseline [2022]: 28 percent Untapping Resilience in Groundwater operations Target [2027]: 50 percent Management (P178786) Baseline [2021]: 0 Source: World Bank operations Target [2027]: 152,000 ASA Pipeline: Source: World Bank Operations SPI 7.5: Sustainable financing models for CORE ASA CCDR (FY23) watershed management developed with and for Water Resources Users Associations Sprinkler Irrigation Photo: World Bank 38 COUNTRY PARTNERSHIP FRAMEWORK FOR KENYA • FY2023-FY2028