The international financial institution World Bank has approved Sh80.9 billion loan to the country to support post-Covid-19 economic recovery.
The loan disbursement is part of the World Bank’s Development Policy Operations (DPO), which lends cash for budget support instead of financing specific projects.
According to World Bank Kenya Country Director Keith Hansen, the operation prioritizes reforms in hard hit sectors, such as healthcare, education, and energy, which have been made urgent by the impacts of the Covid-19 crisis.
“In recognition of the severity of the crisis and need for a comprehensive response, we are supporting the government’s post Covid-19 economic recovery strategy, which is designed to mitigate the adverse socioeconomic effects of the pandemic and accelerate economic recovery and attain higher and sustained economic growth,” he said.
Additionally, the bank said some of the funds would go towards setting up an electronic procurement system for government goods and services to improve transparency.
The government has been working hard to secure foreign funding to fill the huge budget deficit before its financial year closes at the end of this month.
Treasury data shows that the public debt crossed Sh7.28 billion in December 2020, an equivalent of 65.6 per cent of gross domestic product (GDP), from Sh6.01 trillion or 58.0 per cent of GDP a year earlier.
Despite facing criticism that Kenya’s appetite for borrowing has been insatiable, the minister said the country’s debt “remains sustainable though its carrying capacity continues to decline”.
The World Bank said the concessional loan will have a 3.1 per cent annual interest rate.