- Kenya took ten new loans from commercial, multilateral, and the international sovereign bond market in the five months to August as it races towards the Sh9 trillion debt ceiling.
- A new document presented to Parliament by the National Treasury Cabinet Secretary Ukur Yatani shows that the government contracted loans totalling Sh293.55 billion.
Kenya took ten new loans from commercial, multilateral, and the international sovereign bond market in the five months to August as it races towards the Sh9 trillion debt ceiling.
A new document presented to Parliament by the National Treasury Cabinet Secretary Ukur Yatani shows that the government contracted loans totalling Sh293.55 billion between April 1, 2021 and August 31, 2021.
This shows that the government was borrowing an average of Sh58 billion per month on average as it showed no signs of slowing down its debt appetite.
The new loans were procured to help fill the Sh930 billion fiscal deficit in the Sh3.02 trillion budget for the 2020/21 financial year.
The National Treasury document shows that on June 14, 2021, the government signed Sh110.17 billion international sovereign bond agreement with Citi Group Global Markets Europe AG to finance the 2020/21 budget under the development expenditure. The loan will be repaid in two equal annual repayments on January 23, 2033 and January 23, 2034 at an interest of 6.3 per annum.
The government also procured Sh82.62 billion from the International Development Association (IDA) to “accelerate reforms for an all-inclusive and resilient recovery development policy financing.”
“This is aimed at facilitating fiscal and debt reforms to make spending within government more transparent and efficient as well as enhance domestic debt market performance,” reads the National Treasury document.
The loan is also geared towards facilitating electricity sector reforms to strengthen scandal and debt ridden Kenya Power and place the country “on an efficient green path”.
The loan will attract an interest rate of 1.25 percent per annum and a service charge at the rate of 0.75 percent per annum on the withdrawn credit balance.
The commitment charge rate is 0.5 percent per annum on the unwithdrawn financing balance.
The government has also disbursed Sh53.02 billion contracted from the International Monetary Fund (IMF) to finance the 2020/21 budget after a dip in revenue collection.
There is also Sh25.45 billion in extended credit facility from IMF to provide budgetary financing.
Further, the government also borrowed Sh13.85 billion from IDA in second additional financing for the country’s Covid-19 health emergency response project, which largely involves the acquisition of Covid-19 vaccines.
The Samatar-Wajir road project will be financed to the tune of Sh2.2 billion from the Saudi Fund for Development.
This entails construction of the 90-kilometre road to enhance movement of people and goods between Isiolo, Wajir, Garissa, and Mandera.
The government also borrowed Sh1.65 billion from the Arab Development Bank for Economic Development in Africa to upgrade the existing Samatar-Wajir road to a first-degree bitumen standard.
The road connects Samatar to the town of Wajir, the link to the northern-east regions of the country and boarders of the neighbouring countries of Ethiopia and Somalia.
Phase II of the medical waste management project attracted Sh1.3 billion from the Belgium government to finance the production, delivery and installation of 15 AMB series 250 ecosteryl medical waste treatment plans.
There is also Sh1.2 billion funding from the CBC Banque SA of the phase II of medical waste management project to finance materials, goods and services originating from Belgium.
By June 2021, Kenya’s public debt stood at Sh7.7 trillion according to official statistics from the Central Bank of Kenya (CBK).
This comes amid concerns over the public debt that has grown exponentially since 2013 when President Uhuru Kenyatta’s Jubilee administration came to power compounded by doubts over the country’s ability to repay the loans.
This is notwithstanding that the country’s earnings have significantly dropped in missed revenue targets caused by the ravages of the Covid-19 pandemic.
By the time the Jubilee administration was coming to power in 2013, the country’s public debt was at Sh1.6 trillion.
The latest of the new loans present an increase in the government’s borrowing appetite compared to the Sh132.38 billion in 10 new loans that the government procured between September 1, 2020 and March 31, 2021.
A breakdown of the new loans shows that the government borrowed Sh1.92 billion a day or Sh79.94 million an hour during the five-month period.
The new loans, the National Treasury document shows, largely went into budget financing, acquisition of Covid-19 vaccines, road construction in parts of northern Kenya, medical waste management, financing fiscal and debt reforms, enhancing electricity connection among others.
The loan amount for the period is however, a marginal reduction compared to the Sh322.18 billion worth of 15 loans the government borrowed between May 1, 2020 and August 31, 2020, from various multilateral and commercial lenders.
Between September 30, 2019 and April 30, 2020, the government borrowed Sh132 billion.
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 amortizations on new loans obtained from outside Kenya or denominated in foreign currency,” reads Section 31 (3) of the PFM Act.
Yatani told the Finance and National Planning committee of the National Assembly said that the missed revenue collection target brought about by Covid-19 pandemic presents the government with no alternative but to borrow more.
“Our revenue is not up to date. The Covid-19 pandemic has really affected our revenues,” Mr Yatani told the committee chaired by Homabay County Woman Representative Gladys Wanga.
The Kenya livestock commercialization project has also been financed to the tune of Sh2 billion from the International Fund for Agricultural Development.
The loan is meant to increase the incomes of 110,000 poor livestock pastoralist households largely targeting the youth and women in an environmentally-friendly manner in selected project areas of the 10 participating counties.
This will be achieved through climate-smart production for small livestock and support to livestock market development.