From Duncan Miriri
NAIROBI, June 11 (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 announced on Friday.
The Kenyan government is pushing to secure foreign funding to cover a large budget deficit before the end of the fiscal year at the end of 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 funding specific projects.
The bank said some of the funds would be used to set up an electronic procurement system for government goods and services to improve transparency.
According to the World Bank, the concessionary loan bears an annual interest rate of 3.1%. Typically, World Bank loans have zero or very low interest rates and have repayment terms of 25 to 40 years with a five or ten year grace period.
On Thursday, Finance Minister Ukur Yatani presented the budget 2021/22 to parliament with a deficit of 7.5% of gross domestic product, which has been reduced from 8.7% for the current fiscal year ending this month.
The Treasury Department is forecasting economic growth of 6.6% this year and rebounding from 0.6% in 2020 as sectors such as tourism and related services collapsed due to restrictions 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 the helm in 2013, has overseen a surge in public borrowing. Total debt is 70% of GDP, down from 45% when it was acquired – an increase that some politicians and economists say will burden future generations with too much debt.
The government defended the increased borrowing, saying the country needed to invest in its infrastructure, including roads and railways. (Writing by George Obulutsa; editing by Simon Cameron-Moore)
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