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Kenya to receive its biggest loan ever after World Bank approves Sh106.8bn for budget support

NAIROBI, Kenya, May 20 – Kenya is set to receive a whooping Sh106.8 billion loan from the World Bank, an amount the National Treasury says will be used in budget support.

The loan is expected to address Kenya’s widening budget deficit that has seen the government implement revenue-cutting measures to shield citizens from the negative impact of the coronavirus.

The economic meltdown has been occasioned by the coronavirus pandemic, which has ravaged sectors such as tourism and agriculture which are the leading sources of foreign exchange in the economy.

Kenya Revenue Authority had said it would collect about Sh1.86 trillion in the 2020/2021 fiscal year, a target it is unlikely to hit, owing to the coronavirus pandemic.

Kenya’s fiscal deficit, which peaked at 9.1per cent of GDP in the 2016/17 financial year, has been exacerbated by higher spending on infrastructure projects including a railway financed by China.

The approval from World Bank’s Development Program Operations kitty comes 14 days after the International Monetary Fund approved a Sh78.9 billion loan to “address the impact” of the COVID-19 pandemic.

“The fact that World Bank 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,” Treasury Cabinet Secretary Ukur Yatanni said on his official Twitter handle on Wednesday.

While giving the funds, the IMF warned the impact of COVID-19 on the Kenyan economy will be severe.

“The COVID-19 pandemic has delivered a large economic shock to Kenya. The pandemic has impacted nearly all facets of the economy—particularly tourism, transport, and trade—and led to urgent balance of payments and fiscal financing needs.”

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