NAIROBI (Reuters) – Kenya has received a $750 million loan from the World Bank to support its budget and help the East African economy recover from the effects of the COVID-19 pandemic, the multilateral lender said on Friday.
The Kenyan government has made great efforts to secure external financing to fill a large budget deficit before the end of the fiscal year later this month.
The $750 million disbursement is part of the World Bank’s Development Policy Operations (DPO), which lends money for budget support rather than financing specific projects.
The bank said part of the funds will go towards creating an electronic procurement system for government goods and services to improve transparency.
The World Bank said the concessional loan will have an interest rate of 3.1% per annum. Bank loans typically have zero or very low interest rates and repayment periods of 25 to 40 years, with a grace period of five or ten years.
On Thursday, Finance Minister Ukur Yatani presented the 2021/22 budget to parliament, with a deficit of 7.5% of gross domestic product, reduced by 8.7% for the current fiscal year ended this month. .
The Ministry of Finance forecasts an economic growth of 6.6% this year, recovering from 0.6% in 2020, when sectors such as tourism and related services collapsed due to restrictions imposed to contain the spread of COVID-19.
The World Bank predicts that Kenya’s economy will grow 4.5% this year and 4.7% in 2022.
President Uhuru Kenyatta, who took charge in 2013, oversaw a jump in public lending. The total debt is 70 percent of GDP, down from about 45 percent when he took office — an increase that some politicians and economists say is burdening future generations with too much debt.
The government defended the increase in debt, saying the country must invest in its infrastructure, including roads and railways.
Written by George Obulutsa; Edition by Simon Cameron-Moore