Kenya is seeking budget support facilities from World Bank
East African country, Kenya had opened up a discussion with the World Bank with a view to secure credit facilities to support its budget in the face of the impact of covid-19 on the economy, Treasury Secretary Ukur Yatani said.
The government of Kenya and the bank are “still discussing policy areas” to be covered by the financing and are yet to agree on the amount, Yatani said. The loan “doesn’t look likely for this financial year,” he said Tuesday in a text message.
The World Bank in May approved $1 billion in budget support for Kenya, which followed a $750 million package approved in 2019. The government will spend the money on subsidized agricultural inputs, affordable housing and improving transparency in public financial management, the lender said at the time.
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This will be the third time Kenya takes up a so-called development policy operation loan from the World Bank. It is a tool used to provide financing to help countries plug budget deficits and signals the nation’s shift to seek cheaper concessional funding as it faces debt distress concerns. The International Monetary Fund in May raised Kenya’s risk of debt distress to high from moderate, citing coronavirus shocks.
The budget gap of East Africa’s biggest economy is seen at $$7.8 billion in the current fiscal year, or 7.5 percent of gross domestic product, and will be partly financed via net foreign borrowing of 347 billion shillings, Yatani said in his June budget speech. Kenya also plans to borrow 493.4 billion shillings domestically.
Kenya has no plans to issue commercial debt such as Eurobonds or syndicated loans to finance the budget in the current financial year that ends June 2021, Yatani said on Tuesday.