• The loan, initiated before the health crisis started, is the second ever such direct lending for the budget from the World Bank, after the first was processed last year.
  • “Its approval is timely, since it will help fill the financing gap generated by the severe, ongoing shock to Kenya's economy," the World Bank said in a statement.
  • It comes two weeks after the IMF approved $739 million in emergency financing, a move which has supported the shilling currency.

NAIROBI: The World Bank has approved a $1 billion loan for Kenya to help it close a gaping budget deficit and tackle the economic shocks from the coronavirus pandemic, both sides said on Wednesday.

The loan, initiated before the health crisis started, is the second ever such direct lending for the budget from the World Bank, after the first was processed last year.

“Its approval is timely, since it will help fill the financing gap generated by the severe, ongoing shock to Kenya's economy," the World Bank said in a statement.

The budget deficit has swollen to 8.2pc of GDP in the financial year to the end of June, from an initial forecast of under 7pc, mainly due to reduced tax collection and lost revenue from VAT and income tax cuts.

Finance Minister Ukur Yatani said the approval was a vote of confidence in the government's handling of the economy.

“The… WB (World Bank) does not provide budget support to countries with a weak macro framework," he wrote on Twitter.

The bank did not give the terms of the loan. A senior official at the finance ministry told Reuters in January that the loan would be “fairly priced".

It comes two weeks after the IMF approved $739 million in emergency financing, a move which has supported the shilling currency.