(Bloomberg) -- Kenya is expected to buy its first corn in three years at market prices, a departure from its previous practice, to bolster its strategic reserves. 

The reform is aimed at helping Kenya create conditions for a transparent and predictable agricultural market and forms part of funding conditions under the World Bank’s development financing policy. Kenya has tapped the facility five times since 2019, receiving a total of $4.25 billion.

The Washington-based lender expects that the planned corn procurement “will be conducted competitively, reflecting market prices and ensuring a broader participation of the private sector,” Aghassi Mkrtchyan, the World Bank’s senior country economist, said in an emailed response to questions.

In a Aug. 29 cabinet dispatch, the government said it plans to buy at least 1 million bags of corn at a price to be announced by the Agriculture Ministry.

Hot Potato

The Kenyan government previously allocated resources to the Strategic Food Reserve Trust Fund to finance corn purchases “at a premium above the price offered by the market, while selling the maize to milling companies at discounted prices,” according to Mkrtchyan. “This created disincentives for the private sector to participate in maize storage, marketing, and value chain activities.” 

Corn, the main ingredient for the Kenyan staple known as ugali, is a political hot potato, with the government closely monitoring its cost and availability. More participation in the market could help reduce prices, which have contributed to sticky inflation over the last year.

The central bank forecasts that Kenya’s corn output will jump to 47.8 million bags this year, from 34.2 million bags in 2022.

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