Kenya borrowed Ksh105b in four months, shows report

The Jubilee administration borrowed Sh26.25 billion every month from May 1 to August 31 to finance various development projects.

A report by the National Treasury shows that in four months, the government contracted six new loans totalling Sh105 billion. The repayment of most of the loans will commence in 2025.

The document, which was tabled in the National Assembly by the Leader of Majority Kimani Ichung’wa, revealed the loans were contracted between the Kenyan government and commercial and multilateral creditors.

According to the report, four of the loans are from multilateral lenders, one from a bilateral lender and one commercial lender.

The Public Finance Management Act mandates the National Treasury to periodically update Parliament on the country’s debt status.

“The total value of the six new loans signed is equivalent to Sh105,060,287,110. One of the loans had been disbursed by the time of submitting this report,” reads the document.

The new loans bring the total amount the government has borrowed from January 1 to August this year to Sh242.99 billion after a report released in March showed that from January 1 to April 30 the government signed six global loans amounting to Sh137.93 billion.

Short term

The report indicates that the proceeds of the loans will be used to finance various public projects such as Small and Medium Enterprises, finance the Budget, strengthen regional development and mitigate various challenges affecting the country such as drought and Covid-19.

The National Treasury document shows that of the funds, Sh36.2 billion procured from the Eastern and Southern African Trade Development Fund (TDB) as a syndicated short-term multicurrency facility was to finance the government’s 2022/2023 development budget but not limited to trade-related activities.

The loan, according to the report, will be repaid in the form of a bullet payment which is a one-off payment on September 30, 2025.

“The interest rate of the loan is a reference rate plus a margin per annum. The interests on over dues amounts will be increased by 2 per cent per annum above the applicable rate,” adds the report.

Post Covid

To provide post-Covid-19 economic recovery as well as provide competitiveness and economic recovery programme, the government procured a Sh10.5 billion loan from African Development Bank (ADB) whose repayment will commence in 2030.

The National Treasury document says the loan will be used for general budget support programmes whose objective is to strengthen resilience and support post-Covid-19 pandemic recoveries through improved economic governance and enhanced industrial development competitiveness.

“The programme aims at deepening the support to Kenya’s medium-term development agenda by placing emphasis on fiscal performance, strengthening industrial development competitiveness as well as promoting economic and social inclusion by supporting the development of Micro, Small and Medium Term (MSME), social protection coverage and women’s empowerment,” adds the document.

Livestock trade

Another Sh15.6 billion procured from the International Development Association on June 29 this year will go towards enhancing pastoralists’ access to financial services for drought risk mitigation, including them in the value chain as well as facilitating the livestock trade in the horn of Africa.

Kenya is grappling with a huge public debt that has been growing since 2013 when the Jubilee administration came to power.

This added to the Russia-Ukraine conflict which has exerted pressure on fuel and commodity prices.

President Ruto has ordered the National Treasury to cut Sh300 billion from the 2022/23 budget.

Ruto said the reduction of spending is pegged on reducing the government’s borrowing needs from an estimated Sh900 billion in the fiscal year to close the financing hole.

Currently, the country’s public debt stands at Sh8.6 trillion against a ceiling of Sh10 trillion enacted by Parliament in November 2019.

When Jubilee came to power in 2013, the public debt was Sh1.8 trillion.