The World Bank has approved a $1 billion loan for Kenya to support its budget, Treasury Cabinet Secretary Ukur Yatani said on Wednesday.
The COVID-19 pandemic has caused the government’s budget deficit to swell to 8.2 percent of GDP in the financial year to the end of June, from an initial forecast of under seven, mainly due to reduced tax collection and foregone revenue in the form of VAT and income tax cuts.
“The fact that WB (World Bank) does not provide budget support to countries with a weak macro framework is a testimony of the confidence levels of the bank in our new policy reforms,” Yatani said on his Twitter account.
WB Board gives full approval to Kenya’s DPO of USD 1Billion. This is the largest DPO we’ve ever received. The fact that WB does not provide budget support to countries with weak Macro framework is a testimony of the confidence levels of the bank in our new policy reforms.
— Amb. Ukur Yatani™- EGH 🇰🇪 (@BaloziYatani) May 20, 2020
The World Bank expects growth to fall to 1.5 percent this year from 5.4 percent last year due to the pandemic, but the government has a higher forecast of 2.5-3 percent.
The loan comes two weeks after the IMF approved $739 million in emergency financing to help Kenya respond to the economic shock caused by the pandemic, a move which has supported the shilling currency.
Kenya has reported 963 cases of the novel coronavirus and 50 deaths.