Treasury reiterates plan to seek soft loans, keep debt levels low

Friday, July 3rd, 2020 00:00 |
Financial institutions restructured loan agreements with clients to conform to their needs. Photo/PD/FILE

Lewis Njoka @LewisNjoka

National Treasury has reiterated its plan to go for concessional loans as opposed to commercial ones in a bid to keep the debt levels manageable. 

Concessional loans offer extended terms with interest lower than market rates and a grace period longer than the typical commercial loan.

Treasury Chief Administrative Secretary (CAS) Nelson Gaichuhie said debt level in the country was still manageable as the country has been paying every time a loan matures.

“We have a plan on how to repay. Whenever we borrow, it is for development. We will be going for concessional loans,” he said.

Gaichuhie made the remarks in Nairobi during the launch of Treasury’s strategic plan for the period 2018-2022, a five-pillar plan which seeks to enhance the effectiveness and efficiency of national development programmes.

Analysis by Central Bank of Kenya (CBK) indicates the country’s total debt could hit Sh6.6 trillion, with the National Treasury expected to borrow an additional Sh774 billion to finance the budget amid shrinking revenues due to the Covid-19 pandemic.

In the current financial year, the country plans to pay Sh630.1 billion in loans.

Kenya and other countries are pushing for debt relief following the economic shock brought by Covid-19 pandemic in a continental push driven by the African Union.

National Treasury says it is seeking a waiver of debt payment by bilateral lenders as well as multilateral ones such as the World Bank, International Monetary Fund and African Development Bank.

According to the Budget 2020 Policy Statement, Treasury will use increased tax collections and savings from ministerial budget cuts to repay a portion of the debt and offset the ballooning pension bill.

“We will improve revenue collection using Information and Communication Technology (ICT) and expanding the revenue base,” said Gaichuhie.

Five-pillar plan

The treasury’s five-pillar plan seeks to enhance the effectiveness and efficiency of national development programmes.

They are stable and sustainable macro-economic environment, resource mobilisation for public expenditure, and development planning, budgeting and intergovernmental relations. 

Others are implementation, tracking and reporting on policies plans and budgets and strengthening Treasury’s organizational capacity.  

The plan is themed “Sustained Socio-Economic Transformation for Job Creation”. Gaichuhie said with the ongoing Covid-19 pandemic, Treasury would have to find innovative ways to raise funds to implement the strategic plan.

“It goes without saying that we will have to diversify our funding sources and improve our revenue collection to fund the goals set out in this plan,” he added.

He said engagement with development partners and own revenue collection effectiveness would become critical in this regard.

Gaichuhie said Treasury has to change its mindset as it took upon the task of shepherding the country’s resources amid coronavirus pandemic.

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