Kenya spends Sh1.7bn to secure foreign loansFriday September 17 2021
The Controller of Budget (COB) has flagged Treasury for Sh1.657 billion paid to secure future borrowing, saying the loans should be cancelled to ease the debt load on taxpayers.
Commitment fees are charged on borrowers for credit that has not been advanced and is a way of guaranteeing that a lender will keep the funds.
COB Margret Nyakango told Parliament that the loans for 17 projects include expansion of the Jomo Kenyatta International Airport (JKIA), power connections, construction of a dam to ease water supply hitches to Nairobi and road construction.
Treasury paid the commitment fees for loans to Japanese, Chinese and European banks at the end of June piling pressure on the country’s ballooning debt.
Nyakango’s call to drop the loan applications comes at a time Kenya’s maturing debt has piled pressure on the country’s expenditure plans and squeezed funds for development projects.
“We recommend that these loans should be cancelled and this will reduce the loan book balance and consequently save taxpayers payments on the commitment fees,” Mrs Nyakango told Parliament Thursday.
The Treasury also committed Sh225.08 million to secure funding for installation of an underground power transmission line in Kileleshwa, Westlands, Parklands and Riverside estates and Sh21.447 million to secure funds for construction of a second runaway at the JKIA.
Fees to secure funds for an underground electricity transmission line to State House, Ngong Road and neighboring estates top the list at Sh393.8 million followed by Sh304.58 million for construction of phase two of the Ruiru dam.
Mrs Nyakango said inefficiencies of State agencies tasked with implementing the projects have led to payment of the commitment fees, adding that the government should ensure immediate execution of the projects to protect taxpayers from losing funds.
The fees add to Kenya’s growing loan repayment burden at a time more debts are falling due amid gaping budget deficits in the wake of the Coronavirus ravages on the economy.
Kenya has budgeted Sh1.169 trillion towards debt repayment in the year to June, representing 36.6 per cent of the budget— the highest component of spending for the financial year.
The country in January secured deals to suspend debt service with rich countries and other creditors including China in the six months to June.