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Shock of Sh322b loan in four months

By Mercy Mwai
Friday, December 4th, 2020
Majority Amos Kimunya who tabled the report from the National Treasury. Photo/PD/File
In summary
    • Sh17.1 billion loan was signed between the government and International Development Association towards second informal settlement projects.
    • Another loan signed with the International Monetary Fund is for Sh82.9 billion to go towards financing of the Rapid Credit facility for budget financing.
    • A loan of Sh11.4 billion between the government and ADB bank will operationalise the Kenya Mortgage Refinance company.

Mercy Mwai @wangumarci

The government borrowed Sh2.7 billion every day between May 1 and August 30 this year, a new report has revealed. 

In the report, the government took Sh322 billion loans with the repayment period for most of the loans set to commence in 2025 and will be paid in Euros.

A report from the National Treasury tabled before the National Assembly yesterday by Majority Leader Amos Kimunya, revealed that the loans have been contracted between the Kenyan government, commercial and multilateral creditors.

According to the report, 12 of the loans are from a multilateral lender and three are from bilateral lenders. Four having already been disbursed.

“The total value of the 15 new loans signed is equivalent to Sh322,178,194,048.

Four of the loans have been disbursed by the time of submitting this report,” reads the report in part.

The new loans bring the total amount the government has borrowed from September 1 last year to August to Sh454.5 billion after another report released in June this year, showed that from September 1 last year to April 30 this year, the government signed 12 new loans amounting to Sh132.3 billion.

The report indicates that the proceeds of the loans will be used to finance Covid-19 emergency response projects and, locusts menace, Universal Health Care (UHC), youth projects and infrastructure projects in the housing sector, energy, environment.

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

“At the end of every four months, the Cabinet Secretary shall submit to Parliament stating the loan balances brought forward, carried down, drawings and amortisations on new loans obtained from outside Kenya or denominated in foreign currency,” Section 31 (3) of the PFM Act states.

Debt ceiling

The signing of the new loans comes just days after National Treasury Cabinet Secretary Ukur Yatani revealed that Kenya’s total debt portfolio stood at Sh7.2 trillion as of September 20, about Sh1.8 trillion shy of the Sh9 trillion debt ceiling imposed by the Public Finance Management Act (PFM) 2012.

Last month, Bloomberg reported that the government was seeking Sh253.6 billion (USD 2.3 billion) to support Covid-19 response.

The country’s total debt is evenly spread between external and domestic sources at Sh3.66 trillion (51 per cent) and Sh3.46 trillion (49 per cent) respectively.

According to the report, Sh23.9 billion borrowed from the African Development Bank (ADB) and signed on May 22 this year will go towards supporting the government’s efforts to mitigate the economic, and social impacts of Covid-19 pandemic on local businesses and households.

The loan will be repaid in 34 principles of Sh745.6 million (5,529,411 euros) that will be paid semi-annually on February 1 and August 1 beginning August 2027.

The Covid-19 loans come at a time when investigations are ongoing regarding the loss of Sh7.6 billion at the Kenya Medical Supplies Authority (Kemsa).

  Another loan signed between the government and France is for Sh4.2 billion, for the supply of medical equipment to public healthcare institutions in the country and which will be repaid on 56 principle payments of Sh79,553,572 (589,286 Euros) beginning December 2032.

“The purpose of the loan is to supply medical equipment and associated services to the Moi Teaching and Referral Hospital of Eldoret and six sub county hospitals as well as the supply of medical equipment to fight Covid-19,” reads the report.

The other loan signed between the government and International Development Association on May 28  is for Sh4.98 billion as an emergency locust response project.

The loan, to be paid in 40 principal repayments of Sh87.5 million (648,450 Euros) beginning November 2025 is to help the government respond and prevent the threat to livelihoods posed by the desert locust outbreak and to strengthen the country’s preparedness.

For the attainment of the UHC phase, the report shows that the government signed a loan between Japan International Cooperation Agency on August 27 for Sh8.2 billion.