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Kenya Receives $750 Million Loan From World Bank

Kenya has received a $750 million loan from the World Bank to support its budget and help the East African economy recover from the effects of the COVID-19 pandemic.

The World Bank approved this development policy financing to support policy reforms that will strengthen transparency and accountability in public procurement and promote efficient public investment spending.

The $750 million disbursements are part of the World Bank’s Development Policy Operations (DPO), which lends cash for budget support instead of financing specific projects.

The Loan is expected to prioritise reforms in hard-hit sectors, such as healthcare, education and energy, which have been made urgent by the impacts of the COVID-19 crisis.

“The operation priorities reforms in the had hit sectors such as healthcare, education and energy, which have been made urgent by the impact of the COVID-19 crisis. In recognition of the severity of the crisis and the need for a comprehensive response, theWorld Bank supports the government’s post-COVID-19 economic recovery strategy, which is designed to mitigate the adverse socio-economic effects of the pandemic accelerate economic recovery and sustained growth.” Keith Hansen, World Bank County Director for Kenya.

The funds will also be used to establish an electronic procurement platform for the public sector that seeks to make government purchases of goods and services transparent.

In his Budget Speech on Thursday, National Treasury Cabinet Secretary Ukur Yatani said December 31 would be the final date for rolling out the electronic government procurement system and discontinuing the manual procurement processes.

“In this regard, the government will realise savings as a result of greater efficiency, reduced operational costs, enhanced transparency and accountability through increased bidder participation,”  Finance Minister Ukur Yatani.

The policy operation also prioritises energy sector reforms to improve electricity access and ensure that Kenyans benefit from the least-cost, clean energy sources.

Kenyans will also benefit from better healthcare, especially for the poorest and most vulnerable households, through National Hospital Insurance Fund governance reforms and the establishment of the Kenya Centre for Disease Control to strengthen disease prevention, detection and response.

Reforms will further seek to provide Kenyans with more equitable access to higher education through a performance-based funding method to reduce the imbalances and inefficiencies created by the existing funding model for universities.

These measures are expected to yield financial savings of up to $2.6 billion.

On Thursday, Finance Minister Ukur Yatani presented to parliament the 2021/22 budget, with a deficit of 7.5% of gross domestic product, reduced from 8.7% for the current fiscal year ending this month.

In the budget presentation, Ukur Yatani said the country expects economic growth of 6.6% this year, recovering from 0.6% in 2020 when sectors like tourism and related services collapsed due to restrictions imposed to curb the spread of COVID-19.

Currently, the total debt in Kenya is 70% of the GDP, with the world bank loans standing at Kes 1.1 trillion.