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© Reuters. FILE PHOTO: FILE PHOTO: A health worker talks to her colleagues as they prepare to receive the AstraZeneca/Oxford vaccine under the COVAX scheme against coronavirus disease (COVID-19) at the Kenyatta National Hospital in Nairobi, Kenya March 5, 2021. REUT By Duncan Miriri

NAIROBI (Reuters) – 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 multilateral lender said on Friday.

The Kenyan government has been pushing hard to secure foreign funding to fill a wide budget deficit before its financial year closes at the end of this month.

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

The bank said some of the funds would go towards setting up an electronic procurement system for government goods and services to improve transparency.

The World Bank said the concessional loan will have a 3.1% annual interest rate. Typically, World Bank loans have zero or very low interest rates and have repayment periods of 25 to 40 years, with a five- or 10-year grace period.

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.

The finance ministry forecasts a 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.

The World Bank forecasts Kenya’s economy will grow 4.5% this year, and 4.7% in 2022.

President Uhuru Kenyatta, who took the helm in 2013, has overseen a jump in public borrowing. Total debt stands at 70% of GDP, up from about 45% when he took over – a surge that some politicians and economists say is saddling future generations with too much debt.

The government has defended the increased borrowing, saying the country must invest in its infrastructure, including roads and railways.