At least 70 percent of sub-Saharan African economies have approached the World Bank for loans to finance their budget shortfalls as the Covid-19 crisis batters the continent.
The global lender on Wednesday revealed that most countries across the globe are faced with extremely limited financing options amid the pandemic.
“Between 70 – 80 percent of sub-Saharan African economies have applied for budget support financing,” World Bank country director for Kenya, Felipe Jaramillo responded to a question during a virtual press briefing.
“Part of the World Bank’s role is to be there for economies when capital markets are closed,” he added.
The bank projects Africa’s economy to contract by 2.1 percent (-ve growth) from an optimistic standpoint and to shrink by as much as 5.1 percent in the worst case scenario.
But the situation is not limited to Africa. Several economies in Latin America, Asia, Middle East and Eastern Europe have applied for the World Bank’s budget lifeline, according to Jaramillo.
Previously under normal circumstances, the global lender would receive between 40-50 country budget support applications per year, but the number has now exploded within just two months.
Besides wreaking havoc on international trade, taps have closed in international capital markets – limiting access to syndicated loans and Eurobond markets. Most governments have traditionally resorted to the above options to finance shortfalls and build projects, owing to the instrument’s flexibility.
But times have changed and countries have found themselves in uncharted territory where demand has skyrocketed yet financing options have nosedived.
On Wednesday, the World Bank approved $1 billion loan towards meeting Kenya’s budget shortfalls as the country battles multiple crises – Covid-19, desert locust invasion and floods.