The Treasury paid Sh680.3 million as commitment fees for undrawn loans in the six months to December last year, highlighting the adverse impact of delayed projects on Kenya’s already dire financial state.
A report by the Controller of Budget tabled in Parliament has revealed the expenditure, adding to Kenya’s debt burden at a time the Exchequer has been thrown into a cash crunch amid mounting debt.
The report did not disclose the lenders to whom the fees were paid even as officials at the National Treasury flag the expenditure as worrying.
“In the first half of 2022/23, the National Treasury paid commitment fees of Sh680.3 million on undisbursed loans,” CoB Margaret Nyakango says in the report.
President William Ruto’s administration has suspended dozens of projects initiated by the previous regime, making it impossible for affected ministries and agencies to absorb their development funds.
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.
The fee is charged because the lender has set aside funds for the loan but cannot yet charge interest pending drawdown.
At least 19 projects were hit by a wave of budgetary cuts under the new administration that in turn affected projects being co-financed with international lenders such as the World Bank and the African Development Bank.
The World Bank, one of Kenya’s largest financiers, charges a commitment fee of 0.25 percent every year for its loans given under the International Development Association (IDA).
The Auditor-General and Controller of Budget have recommended that State agencies first acquire land and compensate owners and relocation of utilities lying in project areas, before signing any new loan.
The two offices have further called on Treasury to cancel any un-drawn loans as part of easing the debt burden on the country.
