Kenya - Second Kenya Fiscal Sustainability and Resilient Growth Development Policy Operation

Overview & Synopsis

The development objective of the Second Kenya Fiscal Sustainability and Resilient Growth Development Policy Operation for Kenya is to (i) promote efficiency, transparency, and equity of public finance; (ii) foster more competitive and inclusive product and labor markets; and (iii) strengthen climate action. The operation, second in a three-operation series, advances fiscal and governance reforms by mandating a Treasury Single Account (TSA), submitting amendments to the Public Financial Management Act to accelerate disbursements of capital grants to counties, rolling out electronic government procurement (e-GP), tightening payroll controls, and enforcing conflict-of-interest regulations to curb misuse of public office. It strengthens social protection through regulations that operationalize the Enhanced Single Registry (ESR) for objective identification, enrollment, and recertification of beneficiaries under the National Safety Net Program (NSNP), with indexation of benefits envisaged. The business environment is improved via county licensing regulations that streamline and harmonize procedures and fees, while competition and digital market dynamism are supported through submission of a Competition Amendment Bill and complementary sectoral regulations. Human capital and labor market inclusion are enhanced by Kenya National Qualifications Framework regulations that enable Recognition of Prior Learning and expand access to Technical and Vocational Education and Training (TVET). Refugee inclusion is advanced through Cabinet approval of the Shirika Plan and telecommunications regulations recognizing refugee identification for SIM registration, with further steps to enable regulated financial access. Climate action is strengthened through adoption of the National Urban Transport Policy to support mass transit and e-mobility, amendments to the Forest Conservation and Management Act to align with the National Forest Policy, and approval of a Sovereign Sustainability-Linked Finance Framework to mobilize climate finance. Expected results include higher procurement through e-GP and improved wage bill discipline; stronger verification of public officials’ interest declarations; better-targeted and more equitable social transfers; increased inter-county trade and e-commerce activity; more ICT investment supported by pro-competition reforms; expanded TVET enrollment; integration of refugees into national and county systems and livelihoods; reduced transport-related greenhouse gas emissions and restoration of terrestrial areas under enhanced conservation; and mobilization of sustainability-linked climate finance consistent with Kenya’s Nationally Determined Contribution.