Kenya has written to the world Bank with requests for a loan to provide further budget support.
According to Treasury CS Ukur Yattani, Kenya is still in talks with the World Bank on policy areas to be covered by the financing and are yet to agree on the amount, Yatani said.
CS Yattani said the loan doesn’t look likely for this financial year.
The World Bank in May approved $1 billion in budget support for Kenya, which followed a $750 million package approved in 2019.
Nairobi said it will spend the money on subsidized agricultural inputs, affordable housing and improving transparency in public financial management.
This will be the third time Kenya takes up a so-called development policy operation loan from the World Bank.
World Bank provides financing to help countries plugged in 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, in a report published by Bloomberg, raised Kenya’s risk of debt distress to high from moderate, citing coronavirus shocks.
According to the lender, Kenya’s budget gap is seen at 840.6 billion shillings ($7.8 billion) in the current fiscal year or 7.5% of gross domestic product.
CS Yattani said in his June budget speech that the budget gap will be partly financed via net foreign borrowing of 347 billion shillings.
Lest we forget, Kenya also plans to borrow 493.4 billion shillings domestically.
On Tuesday this week, CS Yattani said 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.
