Germany has pledged to forgive a loan of €60 million (approximately Ksh 8.4 billion) that Kenya owes.
This forgiveness, however, is conditional; Kenya is required to allocate these funds specifically for climate action initiatives.
This arrangement, referred to as a debt-for-climate swap, is part of Germany’s larger strategy to combat climate change while easing the financial pressures faced by its partner countries.
The details of this agreement are included in the National Treasury’s Annual Borrowing Plan for the Financial Year 2024/25.
“In 2024, Germany also participated in a debt swap program, converting €60 million for similar development purposes,” the document reads.
The waiver will not only alleviate Kenya’s financial responsibilities but also direct essential resources towards renewable energy and sustainable agriculture, particularly emphasizing projects that enhance climate resilience.
According to the agreement, Kenya is set to allocate an equivalent of €60 million over several years to support initiatives aimed at addressing the impacts of climate change.
The degree of success achieved by these initiatives will influence the extent of Germany’s debt cancellation.
Among the proposed projects are enhancements to rural infrastructure to improve farmers’ market access and initiatives to promote youth employment in climate-resilient industries.
This debt-for-climate exchange is in harmony with the sustainability objectives of both Kenya and Germany, aiming to lower carbon emissions.
The €60 million (Sh8.4 billion) resulting from the debt-for-climate arrangement between Germany and Kenya will be utilized for a range of climate action initiatives.
A notable portion of these funds, amounting to €31 million (Ksh 4.4 billion), will be allocated to the development of the Bogoria-Silali Block geothermal field.
This initiative is essential for enhancing Kenya’s renewable energy capabilities and ensuring the stability of the national power grid.
The remaining funds will be allocated to climate resilience initiatives in agriculture, with a focus on bolstering food security and promoting youth employment in the rural regions of western Kenya.
For instance, upgrading rural road infrastructure will facilitate improved access for farmers to markets, thereby minimizing post-harvest losses.
This collaboration presents a mutually beneficial scenario as Kenya can decrease its debt while participating in global climate initiatives, and Germany can reinforce its relationship with the East African country while furthering its own climate objectives.