State borrows Sh132b in seven months, Treasury report reveals
Mercy Mwai @wangumarci
The government has borrowed a whopping Sh132.4 billion in just seven months, a new report shows.
Report from the National Treasury shows between September 1, 2020 and March 31 this year the government contracted 10 new loans at Sh19 billion monthly whose repayment period will commence in 2061.
Report, which was yesterday tabled in the National Assembly by Majority Leader Amos Kimunya, revealed that the loans have been contracted between the Kenya Government, commercial and multilateral creditors.
According to the report, four of the loans are from a multilateral lender and six from bilateral lenders.
“The total value of the 10 new loans signed is equivalent to Sh132,376,087,111.
One of the loans had been disbursed by the time of submitting this report,” he said.
New loans bring the total amount the government has borrowed from May 1, 2020 to March 31, 2021 to Sh454 billion after another report released late last year showed that from May 1 to August 30, 2020 the government signed 12 new loans amounting to Sh322 billion.
Report further indicates that proceeds of the loans will be used to finance various State projects like water, roads projects such Bus Rapid Transport and Technical and Vocational Educational and Entrepreneurships (TVETES).
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.
According to the report, Sh6.4 billion borrowed from the Export-Import Bank of Korea signed on January 29, 2021 will go towards the establishment of Bus Rapid Transit Line 5 project whose objective is to provide economically feasible BRT, secure citizen’s mobility, accessibility and safety as well as reduce the environmental effects caused by traffic congestion.
The loan will be repaid in 60 semi-annual installments beginning July 2031 to January 2061.
In the roads and transport sector, the government signed two other loans worth Sh17.6 billion for Nairobi ITS establishment and junction improvement project phase 11 to provide for the structural improvement of junctions and expansions ofITS, enhance urban mobility and safety in Nairobi as well as reduce social cost caused by traffic congestion.
“The loans will be repaid in 60 semi-annual installments from July 20, 2021 to January 20, 2061.
The interest rate of the loan is 0.1 per cent per annum on the disbursed loan amount and the service charge is 0.1 per cent per annum on disbursed loan amount,” the report.
Further, the government also signed a Sh86 billion project for the Horn of Africa Gateway Development Project whose objectives are to enhance movement of people and goods, digital connectivity, access to social services to communities at designated locations along the targeted sections of the Isiolo-Mandera regional corridor and to support the capacity of selected transport related institutions in the country.
To fund TVETE, the government signed a Sh4.2 billion loan with African Development Fund that will be repaid in Euros from May 2025 through to November 15, 2049.
According to the report, objectives of the project is to increase inclusive access to technical education and training through expansion of infrastructure and training equipment, including for students with special needs as well as facilitate evidence based decision making in TVETE through training and research for sustainable development.