- The loan is priced at 1.35 to two per cent with a five-year grace period. The facility has is expected to be paid in 30 years.
- The grant is coming just a week after IMF gave Kenya $739 million (Sh79 billion) Rapid Credit Facility to help the country cover the balance of payments shortfalls
Image: FILE
Kenya has received $1billion (Sh106 billion) from World Bank to support its budget and cushion the economy from the vagaries of the Covid-19.
World Bank Country Director for Kenya, Felipe Jaramillo told a virtual press conference that the $1 billion financings comprised a $750 million credit from the International Development Association (IDA) and a further $250 million loan from the International Bank for Reconstruction and Development (IBRD).
The loan is priced at 1.35 to two per cent with a five-year grace period. The repayment period is 30 years.
To secure the financing, Kenya has undertaken policy reforms that directly benefit many low-income Kenyan households.
Smallholder farmers will now benefit from better targeting of subsidised agricultural inputs through electronic vouchers. The supply of affordable housing is expected to increase, on the back of the updating of antiquated legislation that hindered the development of the housing market.
World Bank said Kenya has recorded strong economic growth in recent years that has led to a reduction in poverty.
The poverty headcount rate declined from 43.7 per cent in 2006 to 36.8 per cent in 2015 (latest data) while GDP growth averaged 5.7 per cent between 2013 and 2018, at 1.9 percentage points higher than the average for Sub-Saharan African countries (of 3.8 per cent).
However, with GDP growth plummeting to a projected 1.5 per cent in 2020, the ongoing COVID-19 crisis threatens to derail progress in the reduction of poverty and boosting shared prosperity.
This is the second time the country is receiving the kind of facility. Last year, the global lender approved $750 million for Kenya to enhance inclusive growth, accelerate poverty reduction and achieve its Vision 2030 objective of becoming a middle-income industrialized country.
World Bank has set aside $160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery.
This includes $50 billion of new IDA resources through grants and highly concessional loans.
The grant is coming just a week after IMF gave Kenya $739 million (Sh79 billion) Rapid Credit Facility to help the country cover the balance of payments shortfalls this year and perhaps cushion the weakling shilling that currently trades above 106 units against the greenback.
Treasury warmly received World Bank’s loan, with CS Ukur Yatani saying that the approval signifies the international community’s confidence in Kenya’s fiscal policy reforms.
"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 CS Ukur Yatani tweeted.