DEBT

Kenya requests World Bank for new Sh82 billion loan

It hopes the facility to be approved and disbursed end of this month or earl May

In Summary
  • Kenya expects to use the loan to finance critical development expenditures in the Budget for the financial year ending June 30.
  • In May last year, Kenya received $1billion (Sh106 billion) from World Bank to support its budget and cushion the economy from the vagaries of the Covid-19.
Treasury CS Ukur Yatani.
Treasury CS Ukur Yatani.
Image: FILE

Kenya has applied for a new $750 million (Sh81.75 billion)loan from the World Bank and hopes to receive it at the end of this month or early May. 

The National Treasury Cabinet Secretary Ukur Yatani revealed this when he held talks with Taufila Nyamadzabo, executive director for the World Bank in Africa on Wednesday.

Kenya expects to use the loan to finance critical development expenditures in the Budget for the financial year ending June 30. 

''Kenya looks forward to a favorable outcome once the request is placed before the Board of Directors at the World Bank in the coming few weeks,'' Yatani said. 

He pleaded with World Bank to approve the loan request approves preferably by the end of April or early May to enable the country to make the prompt intervention.

In May last year, Kenya received $1billion (Sh106 billion) from World Bank to support its budget and cushion the economy from the vagaries of the Covid-19.

It 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.

Kenya's request for a new facility from World Bank is coming just days after IMF approved the $2.34 (Sh255 billion) loan, sparking social media uproar against high debt appetite by President Uhuru Kenyatta's regime that has seen public debt balloon to Sh7.35 trillion by January. 

The exchequer has since dismissed fears of the debt crisis in the country, saying that it is well managed. 

Yatani who also held a bilateral meeting with Africa's director for the International Monetary Fund (IMF) Abebe Selassie Abebe said the amount will be spent prudently. 

He dismissed social media protests by Kenyans opposed to the facility and committed to sharing candid details with the public to avert misinformation. 

During those meetings, Yatani gave an update on the country's fiscal position, saying that loss of jobs due to the current Covid-19 pandemic strained the government's total revenue collection, resulting in a shortfall of Sh113.2 billion as of the end of February.

According to him, the high job loss resulted in a 12.7 per cent drop in income tax. 

 The total revenue including Appropriations in Aid (A-i-A) by the end of February 2021 was Sh1.079 trillion against a target of Sh1.192 trillion, resulting in a shortfall from the target of Sh113.2 billion.

''This deviation from the target of Sh113.2 billion was explained by a deviation from the target of Sh89.3 billion in ordinary revenues and Sh24 billion in ministerial A-I-A,'' Yatani said. 

A slowdown in business activities especially after Kenya imposed strict measures to curb the spread of the virus between March and July last year also hurt the collection of  Value Added Tax and Import Duty which dropped 8.1 and 0.4 per cent respectively. 

The revenue shortfall is despite the fact that the Kenya Revenue Authority (KRA) has surpassed its collection target in the past four consecutive months since December. 

Last week, the revenue agency said it collected Sh144.6 billion in March, Sh6.6 billion past its target.  This was the highest revenue performance rate since the beginning of the financial despite a challenging economic environment brought about by Covid-19.

It also surpassed targets in December, January and February.

The total expenditures and net lending by the end of February amounted to Sh1.52 trillion which was below target by Sh232.1 billion.

The shortfall was largely attributed to below target absorption of recurrent expenditures by Sh91.5 billion and development expenditures by Sh8 billion.

The overall actual fiscal deficit including grants for the period under review was Sh433.6 billion (3.9 percent of GDP), against a target of Sh966.6 billion (8.7 percent of GDP).