This archive report was first published on 21 May 2020.
Kenya's debt burden has deepened in recent months, with the government borrowing Sh190 billion from the International Monetary Fund (IMF) and the World Bank to combat the Covid-19 pandemic.
On May 20, 2020, the World Bank approved a Sh106 billion loan to Kenya, the single biggest loan from the Bretton Woods institution to the country. The loan is part of the government's efforts to close the fiscal financing gap, which has been exacerbated by the pandemic.
The loan is comprised of a Sh79.5 billion credit from the International Development Association (IDA) and Sh26.5 billion from the International Bank for Reconstruction and Development (IBRD). The funds will be used to meet the government's revenue shortfall, which has been estimated at Sh858.8 billion, the biggest in Kenya's history.
Earlier this month, the IMF gave Kenya Sh78.3 billion to help fight the Covid-19 pandemic. The money was drawn under the Rapid Credit Facility. In April, the World Bank gave the Health ministry Sh5.3 billion to finance production of sanitisers, protective gear for medical personnel, and scaling up bed capacity for Covid-19 patients.
Kenya's total debt has now surpassed Sh6.3 trillion, and is fast racing towards the Sh7 trillion mark. The government's borrowing locally and from other multilateral lenders has added to this figure, which now stands at over Sh200 billion.
Treasury Cabinet Secretary Ukur Yatani said the loan approval by the World Bank is a vote of confidence in the government's handling of the economy. He added that the World Bank does not provide budget support to countries with a weak macro-economic framework.
Mr Yatani said the funds will be directed toward strengthening health systems, including providing better access to health services, improving disease surveillance, and public health interventions.
However, budget experts have termed the government's revenue projections for the 2020/21 budget as too ambitious, given the current economic situation. The national government expects to generate Sh1.8 trillion in revenue, but this is almost the same amount as what it planned to raise in the current financial year.
The World Bank also stated that the latest loan will support reforms that help advance the government's inclusive growth agenda, including affordable housing and support to farmers' incomes.
