Kenya secures $750m loan from World Bank to help recover from effects of COVID-19 | Investment News
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 lender said on Friday. multilateral.
The Kenyan government has been pushing hard to secure foreign funding to fill a large budget gap before its financial year closes at the end of this month.
The disbursement of $750 million is part of the World Bank’s Development Policy Operations (DPO), which lends money for budget support instead of funding specific projects.
The bank said part of the funds would go towards setting up an electronic procurement system for government goods and services to improve transparency.
The World Bank said the concessional loan will have an annual interest rate of 3.1%. Typically, World Bank loans have zero or very low interest rates and repayment periods of 25 to 40 years, with a grace period of five or 10 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 from 8.7% for the current fiscal year ending this month.
The Ministry of Finance predicts economic growth of 6.6% this year, compared to 0.6% in 2020 when sectors like tourism and related services collapsed due to restrictions imposed to curb the spread of COVID-19.
The World Bank predicts that Kenya’s economy will grow by 4.5% this year and 4.7% in 2022.
President Uhuru Kenyatta, who took the reins in 2013, has overseen an increase in government borrowing. Total debt stands at 70% of GDP, up from around 45% when he took office – a rise that some politicians and economists say is burdening future generations with too much debt.
The government has defended the increased borrowing, saying the country needs to invest in its infrastructure, including roads and railways.
(Writing by George Obulutsa; Editing by Simon Cameron-Moore)
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