Kenya deeper into debt as it borrows Sh132b in 7 months

Friday, June 5th, 2020 00:00 |
The National Treasury building. Photo/PD/Alice Mburu

Mercy Mwai @wanguimarci

The government borrowed more than Sh132.3 billion in the past seven months for projects and fight against coronavirus pandemic, indicates a report tabled in the National Assembly by Majority Leader Aden Duale, yesterday.

The 12 loan facilities, which betray the Jubilee administration’s voracious appetite for credit, were signed between September 1, 2019 and April 30. 

Following confirmation, the borrowing in the report, prepared by the National Treasury, the new loans acquired by the government in the last one-and-a-half years totals Sh645.9 billion.

Another report released last year showed that from January to August of the same year the government borrowed Sh513.6 billion. 

Out of Sh513.6 billion loans, Sh208 billion were signed between January to April while the remainder of Sh305.6 billion was acquired from May to August 2019.

This section of the report highlights 13 new loans contracted between the government of Kenya and commercial and multilateral creditors. 

Five of the loans are from multilateral lenders and eight are from bilateral lenders. The total value of the 12 new loans signed is equivalent to Sh132, 314, 214, 604.

The report from the National Treasury indicates the funds will be used to finance Covid-19 emergency response projects and infrastructure projects in the housing sector, energy, environment water.

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 reports 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 PFM Act says.

Of the Sh132.3 billion, Sh5.2 billion signed between the International Development Association (IDA) and the government is to assist in prevention, detection and respond to the threat posed by the Covid-19 pandemic by strengthening the national systems for public health and preparedness in Kenya. The loans will be paid beginning May 2025 through to November 2044.

The move comes at a time when the government has allocated Sh50 billion to fund various ministries dealing with the pandemic.

Technical assistance

Other loans include Sh25.3 billion signed in December to support the Kenya Mortgage Refinancing Company as well as offering technical assistance to the mortgage company, the Ministry of Lands and other affiliated institutions.

The new loans come after President Uhuru Kenyatta promised to construct 500,000 affordable housing units by 2022.

However, only 218 units that are yet to be completed, have been constructed along the city’s Park Road area.

The government has borrowed Sh47.7 billion from Japan International Corporation Agency (JICA) for the construction of a bridge between Mombasa Island and mainland.

The two are separated by the Likoni Channel that is currently crossed through ferries operated by the Kenya Ferry Services.

On the construction of Thwake Multipurpose Water Project that has been under construction for at least 10 years, the government signed a Sh22.3 billion  with the African Development Bank (AfDB).

The report says the purpose of the loan is to enhance water security by impounding water on a larger scale for multipurpose use.

The programme will increase water storage for rural and urban consumption for irrigation and livestock and for hydropower production with principal focus on semi-arid counties of Kitui, Makueni and downstream.

Another Sh 2.7 billion has been signed between the government and Institute De Credito, Spain for the construction of the T-Mall Flyover project for the design of a steel flyover for vehicles in Nairobi.

More on Economy and Policy