Treasury takes Sh138bn loans in four months

Ukur Yatani.
Photo credit: File | Nation Media Group

The government borrowed Sh34.5 billion a month in nine new loans contracted during the first four months of 2022 to finance various development projects.

A document presented to Parliament by National Treasury CS Ukur Yattani on Thursday last week, shows that six of the global Sh137.93 billion new loans are from multilateral lenders and three from bilateral and were contracted between January 1 and April 30.

This is the first time the government has avoided commercial loans that attract a higher interest rates from the local and foreign markets in its borrowing spree.

A breakdown of the new loans translate to Sh1.15 billion a day and Sh47.9 million an hour as the government’s appetite to borrow continues to surge.

The development comes amid concerns over the public debt that has grown exponentially since 2013 when President Uhuru Kenyatta’s Jubilee administration came to power. This is notwithstanding that the country’s earnings have significantly been affected by the Russia-Ukraine war and the slowdown in economic recovery from the Covid-19 pandemic.

Currently, the country’s public debt stands at Sh8.6 trillion against a ceiling of Sh9 trillion enacted by parliament in November 2019.

By the time the Jubilee administration was coming to power in 2013, the country’s public debt was at Sh1.8 trillion.

The new loans, the National Treasury document shows, will finance Covid-19 recovery plans for Small and Medium Enterprises (MSMEs) in Kenya, fiscal debt reforms, climate change response, improve education facilities, water supply, electricity connection, improve rural roads and provide response to the threats caused by desert locusts.

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,” reads Section 31 (3) of the PFM Act.

The National Treasury document shows that Sh60.3 billion procured from the International Development Association (IDA) on March 18, will finance fiscal and debt reforms to make spending more transparent and efficient and enhance domestic debt market performance.

The loan is also meant to finance the “electricity sector and the Public-Private-Partnership (PPP) reforms to strengthen the cornerstone utility (KPLC), place Kenya on an efficient, green energy path and boost private infrastructure investment”.

The funds will also go towards strengthening environmental and natural resource governance, combat climate change and improve healthcare, including the pandemic response.

The Sh26.7 billion acquired from International Bank for Reconstruction and Development (IBRD) on March 18, is for the second accelerating reforms for an inclusive and resilient recovery development policy financing.

The money will also finance fiscal debt reforms, climate change response and electricity connection.

The Sh15.31 billion from IDA will finance primary education equity in the learning programme.

The loan was signed by the government on April 22 to aid in the reduction of regional disparities in learning outcomes, improve the retention of girls in upper primary education and strengthen systems for delivering equitable education outcomes.

The additional financing for coastal region water security and climate resilience project will be done by IDA to the tune of Sh15.8 billion.

The loan is meant to increase bulk water supply and access to Mombasa and Kwale counties. Access to finance and enterprise recovery projects will be financed by Sh10.5 billion from IDA.

This is meant to increase access to financial services and support Covid-19 recovery of MSMEs in the country.

The government also plans to link farmers to markets through improvement of rural roads in western Kenya, a project that will be financed by Sh2.1 billion sourced from the German government in a deal signed on February 9, 2022.

The Malindi integrated social health development programme will be financed by Sh782.55 million from the Italian government.

The loan was contracted on January 26, to improve the social and economic development of Malindi and Magarini sub counties through specific objectives.

The specific objectives of the project include to improve education facilities and school enrolment in Magarini sub-county, improve health facilities and access in the sub county.

At least Sh2.7 billion have been secured from the French government for the supply of forest firefighting equipment and associated services to the Kenya Forestry Service (KFS).