World Bank on Wednesday approved a Sh. 107 billion loan for Kenya to support its budget off-set impact of falling revenue collections occasioned by the novel corona virus.
The loan is expected to address Kenya’s widening budget deficit that has seen the government implements revenue-cutting measures to shield citizens from the negative impacts of the coronavirus.
The economic meltdown has been occasioned by the coronavirus pandemic, which has ravaged sectors like tourism and agriculture which are the leading sources of foreign exchange in the economy.
COVID-19 pandemic has caused the government’s budget deficit to swell to 8.2% of GDP in the financial year to the end of June, from an initial forecast of under 7%, mainly due to reduced tax collection and foregone revenue in the form of VAT and income tax cuts.
The World Bank expects growth to fall to 1.5% this year from 5.4% last year due to the pandemic, but the government has a higher forecast of 2.5-3%.
Kenya Revenue Authority had said it would collect about Sh1.86 trillion in the 2020/2021 fiscal year, a target it is unlikely to hit, owing to the coronavirus pandemic.
The loan comes two weeks after the IMF approved Sh. 73.9 billion in emergency financing to help Kenya respond to the economic shock caused by the pandemic, a move which has supported the shilling currency.