This archive report was first published on 21 May 2020.
On May 21, 2020, the Kenyan government secured a Sh. 107 billion loan from the World Bank, marking a significant boost to the country's finances.
The loan, which is the second part of a two-operational programmatic series, aims to create fiscal buffers over the medium term and crowd in private investment.
According to Ukur Yatani, the National Treasury Cabinet Secretary, the funds will be used for budgetary support. 'World Bank Board gives full approval to Kenya's DPO of $1 billion. This is the largest DPO we've 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,' he said.
Outgoing World Bank Country Director for Kenya, Felipe Jaramillo, noted that the loan is highly concessional and cheaper than commercial debt. 'Its approval is timely, since it will help fill the financing gap generated by the severe, ongoing shock to Kenya's economy,' he said. 'This is in contrast to the cost of borrowing Eurobonds with the seven-year bond at seven percent and the ten-year bond at eight percent.'
The loan is comprised of two components: $750 million from the International Development Association, which will be repaid over 30 years at 1.35 percent interest, and $250 million from the International Bank for Reconstruction and Development, which will have an interest rate of about two percent.
