Government on borrowing spree to fund Budget

Thursday, October 7th, 2021 00:00 | By

National Treasury has been borrowing Sh1.96 billion every day in the last five months to support the Budget and development projects, a report has revealed.

The country, according to the report, secured Sh293.6 billion,  most of which will be used to finance the Covid-19 Health Emergency response Project and securing of Covid-19 vaccines.

Treasury said the loans were secured between April 1 to August 31 this year. The 10 new loans will support the Budget for the remaining period of the current financial year.

The report released by the National Treasury, seven of the loans are from multilateral lenders, two are from bilateral lenders and one from International Sovereign Bond.

“The total value of the 10 new loans signed is equivalent to Sh293,547,328,432.

Four of the loans have been disbursed by the time of submitting the report yesterday,” reads the report tabled by Leader of Majority in the National Assembly Amos Kimunya.

In its last report, the Treasury revealed that the government borrowed an average Sh19 billion every month from September 1 to March 31.

Covid-19 vaccines

The report showed that within the seven months the government contracted ten new loans of Sh132.4 billion.

In the current report, Treasury states that a loan of Sh13.9 billion has been secured to support the second additional Financing for Kenya Covid-19 Health Emergency Response.

The loan, which has been secured from the International Monetary Fund (IMF), will be spent to acquire Covid-19 vaccines.

New loans bring the total amount the government has borrowed from May 1 last year to August 31 this year to Sh748 billion.

The current loans will be repaid in 40 equal semi-annual repayments of EUR 1,760,550 (Sh223.6 million) from 15th October 15, 2026 through to 15th April 2046 and 10 equal semi-annual installments of EUR 3,627,800 (Sh460.7 million) from 15th October 2046 through to 15th April 2051.

“The interest rate of the loan is 1.25 per cent per annum and the service charge is 0.75 per cent per annum on the withdrawn credit balance. The commitment charge rate is 0.5 per cent per annum on the unwithdrawn financing balance,” states the report.

The government has also signed another loan of Sh25.5 billion.

The purpose of the loan, the report states, is to provide direct budget financing for the remaining months before the end of the current financial year.

Road project

The government has secured yet another loan of Sh53 billion to provide direct budget financing and will be repaid in tranches by April 2031.

Another loan has been signed to finance the 90-kilometre Samatar-Wajir Road Project.

The loan was signed on June 7, 2021 by the Saudi Fund for Development and the government.

The amount of the loan is 75,000,000 Saudi Riyals or Sh2.2 billion. It will be repaid between November 2031 to May 2051.

The Arab Bank for Economic Development in Africa has also provided a Sh1.7 billion facility to support the road project.

The road will enhance movement of people and goods between the Isiolo, Wajir, Garissa and Mandera counties.

The government on June 14 signed a Sh1.29 billion to fund Phase II of the Medical Waste Management Project from the Kingdom of Belgium.

The purpose of the loan, the report states, is to finance the production, delivery and installation of medical waste treatment plants.

Pastoralist households

Another loan facility of Sh82.6 billion to facilitate fiscal and debt reforms to make spending more transparent and efficient and enhance domestic debt market performance.

The loan, the report states, will also be used to facilitate electricity sector reforms to strengthen Kenya Power.

Kenya Livestock Commercialisation Project (KeLCOP) will also benefit from a loan facility of Sh2.1 billion secured from the International Fund for Agricultural Development.

The purpose for the loan is to increase the incomes of 110,000 poor livestock and pastoralist households, especially youth and women.

The country also secured an International Sovereign Bond 2021 of Sh110 billion from the CitiGroup Global Markets Europe AG to finance the budget under the development expenditure.

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