The World Bank has approved US $1 billion for Kenya to support the county’s budget according to National Treasury Secretary Ukur Yatani.
The Kenya Inclusive Growth and Fiscal Management Development Policy Financing (DPF), is the second of a two-operation programmatic series aimed at recreating fiscal buffers over the medium term and crowding in private investment. This is the largest development policy operation (DPO) Kenya has ever received.
“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,” Yatani said on Twitter.
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 loan will attract an average interest rate of 1.7 percent and has a 30 year repayment period preceded by a grace period of five years.
According to the World Bank, the DPF complements the recently approved Kenya Covid-19 Emergency Response Project which seeks to prevent, detect, and respond to the COVID-19 outbreak and strengthen national systems for public health emergency preparedness.
“COVID-19 represents an unprecedented shock to the global economy. The World Bank remains very committed to support our client countries in these very challenging times. This operation provides concessional resources to help Kenya navigate the current COVID-19 crisis and to cushion the impact on livelihoods and jobs, while supporting the continued operation of essential public services,” said World Bank Country Director for Kenya, Felipe Jaramillo.
Currently, Kenya’s credit outlook was downgraded to negative by Moodys, the IMF also scaled up country’s risk of debt distress to high, citing the deteriorating fiscal outlook amidst high short term debt service obligations.
“This is majorly due to COVID-19 Shock which has led to a sharp decline in export and economic growth. In addition, the spike in fiscal deficit (from 5.6 percent in the initial budget to 8.2 percent post-Supplementary Budget II Estimates) has been attributed to the strong fiscal response to curb against the pandemic,” Genghis Capital.
The IMF, on the other hand, loaned Kenya $739 million in emergency support.
“Kenya is taking a comprehensive approach in dealing with increased risk in public debt. Improved revenue mobilization and spending discipline should reduce budget deficits, while best practices in debt management will help the Government manage public debt in a transparent and prudent manner. In the meantime, the Government continue to use its access to concessional financing and minimize commercial borrowing,” CS Yatani said at a news conference Wednesday.