The World Bank has approved a $1 billion loan for Kenya to help it close a gaping budget deficit and counter the coronavirus pandemic economic shocks, both sides said on Wednesday.
The loan, initiated before the health crisis began, is the World Bank ‘s second ever direct budget lending, after last year’s first was processed.
“Its approval is timely, as it will help fill the financing gap generated by Kenya’s severe, ongoing shock,” the World Bank said in a statement.
The budget deficit in the financial year to the end of June has swelled to 8.2 percent of GDP, from an original estimate of less than 7 percent, primarily due to decreased tax collection and loss of revenue from VAT and tax cuts.
Finance Minister Ukur Yatani said approval was a vote of confidence in economic handling by the government.
“The… WB (World Bank) does not provide budget support to countries with a weak macro framework,” he wrote on Twitter.
The bank said $750 million of the loan, which will come from the International Development Association, will be repaid over a 30-year period, after a five-year grace period, at 1.35 percent interest.
The second $250 million component from the International Bank for Reconstruction and Development will have a market-based interest rate of approximately 2%.
(REUTERS)
