The World Bank has approved yet another Sh106.8b loan for Kenya to help it close a gaping budget deficit and tackle the massive economic shocks from the coronavirus (Covid-19) pandemic both parties confirmed Wednesday morning.
The loan was however borrowed even before the pandemic hit and is the second ever such direct lending for the budget from the World Bank, after the first was processed last year.
“Its approval is timely, since it will help fill the financing gap generated by the severe, ongoing shock to Kenya’s economy,” the World Bank said in a statement.
The budget deficit has grown upo 8.2pc of the GDP in the financial year to the end of June, from the initial projection by Finance CS Ukur Yatani of 6pc, the spike is mainly due to reduced tax collection and loss of revenue from VAT and income tax cuts.
Cs Yatani said the approval was a vote of confidence in the government’s handling of the economy. “The World Bank does not provide budget support to countries with a weak macro framework,” he wrote on his Twitter.
WB Board gives full approval to Kenya’s DPO of USD 1Billion. This is the largest DPO we’ve ever received. The fact that WB does not provide budget support to countries with weak Macro framework is a testimony of the confidence levels of the bank in our new policy reforms.Loading...
— Amb. Ukur Yatani™- EGH ?? (@BaloziYatani) May 20, 2020
The bank did not give the terms of the loan. A senior official at the finance ministry told Reuters in January that the loan would be “fairly priced”.
The loan comes just two weeks after the IMF approved $739 million in emergency financing, a move which has supported the Kenyan economy
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