Kenya in talks with World Bank for $1Billion loan

Kenya is in advanced talks with the World Bank for “a fairly priced” loan of up to 100 billion shillings ($991.57 million), nearly half of its required external funding this fiscal year.

The balance of the funds will be raised through Kenya’s first sovereign green bond, said Julius Muia, the principal secretary in the ministry of finance, adding that he was confident that this year’s deficit will be covered through affordable loans.

In May last year Kenya and World Bank successfully negotiated for a $750 million loan for budgetary support, documents on the proposed funding.

The East African nation has multiple development funding programmes, worth billions of dollars, with the Washington-based lender, but the funding bypasses the Treasury and is usually channeled straight into the projects.

This was the first time in years the World Bank put cash straight into the Treasury to be used at the discretion of the government.

The loan, which came under the bank’s so-called development policy financing, is designed to support the government’s policy and institutional reforms and help make economic growth more inclusive.

Kenya raised $2.1 billion in a sovereign bond in May 2019, but some critics have expressed concerns over the country’s growing debt burden.

There has been a jump in government borrowing since President Uhuru Kenyatta came to power in 2013 – a rise that some politicians and economists say is saddling future generations with too much debt.

Kenya’s public debt as a percentage of gross domestic product (GDP) has increased to 55% from 42% when Kenyatta took over. The government has consistently defended the increased borrowing, saying the country must invest in its infrastructure, including roads and railways.