The government borrowed an average of Sh2.62 billion every day for four months this year to finance capital projects and fight the Covid-19 pandemic, a new report has shown.
The report shows the National Treasury took Sh322.17 billion loans between May 1 and August 31.
National Assembly Majority leader Amos Kimunya tabled the report from the Treasury in the House. It shows the government procured 15 loans from bilateral and multilateral creditors within the period.
“Twelve of the loans are from the multilateral lender and three are from bilateral lenders. The total value of the 15 new loans signed is equivalent to Sh322,178,194,048,” the report reads.
The repayments of the loans, which will attract varied interests, start in 2025 and the government is expected to repay some of them by 2060.
“Four of the loans have been disbursed by the time of submitting this report [to Parliament],” the report says.
The loans, according to the report, will be used to finance infrastructure projects, including affordable housing, Covid-19 emergency response activities, Universal Health Care, energy, environment and youth projects.
A similar report tabled in the House in June showed that the government borrowed Sh132.3 billion between September 1 last year and April 30.
This implies that the country’s debt burden grew by Sh454.5 billion between September 1 last year and August 31.
Section 31 (3) of the Public Finance Management Act, 2012 requires the National Treasury to submit a report to Parliament on the country’s debt position every fourth month.
The new report follows a warning from international lenders — the World Bank and the International Monetary Fund — that Kenya’s ballooning debt may be difficult to repay.
Last Friday, President Uhuru Kenyatta hit out at foreign donors, apparently over their debt warning.
“I ask you to refrain from trying to direct us in which way we should go. We are clear about where we want to go. We ask you to join us, to support us in that endeavour. But do not interfere because we shall not allow you to dictate to us which direction that should be,” Uhuru said.
He spoke during the groundbreaking ceremony for the G-47 Ugatuzi Towers in Hurlingham, Nairobi.
The country’s external loan has increased four times in the past decade, the World Bank says.
It is currently at Sh3.66 trillion and combined with domestic borrowing at Sh3.46 trillion, Kenya’s total debt is Sh7.12 trillion according to Central Bank of Kenya data.
The Public Finance Management Act sets the public debt ceiling at Sh9 trillion. The government has room to borrow about Sh1.9 trillion, a figure that analysts have projected could be hit within two years.
The new report shows that the government borrowed Sh81.37 billion from the International Development Association in a deal that was signed on May 20.
The loan will be repaid from November 15, 2025, until 2045 at an interest rate of 1.25 per cent per annum and a service charge of 0.75 per cent per annum on the disbursed loan amount. The proceeds will be used to finance affordable housing projects and the improvement of food security.
In another deal signed on May 22, Kenya took a Sh23.85 billion loan from the African Development bank to bridge the budget following dwindling revenue performance due to the ravages of Covid-19.
The government will pay back the money from February 1, 2027, with interest of 0.25 per cent per annum.
In a bid to operationalise the Kenya Mortgage Refinance Company, the government reached out to AfDB for a Sh11.12 billion loan. An agreement between the two parties was signed on April 2. The loan will be paid back from May 2028 until 2044.
The state also signed a deal to procure a Sh6.922 billion loan to construct the Bagamoyo-Horohoro-Lunga Lunga-Malindi road.
“The loan was signed on June 10, 2020, between the African Development Bank Fund as the lender and government of Kenya as the borrower,” the report reads.
On August 17, Treasury and the International Development Association agreed on a Sh17.15 billion loan for the government to improve slums.
The Treasury is warming up for another round of borrowing likely to raise close to Sh1 trillion this fiscal year.
Late last month, Treasury CS Ukur Yatani told Bloomberg that Kenya is seeking a loan of as much as $2.3 billion (about Sh25o billion) from the IMF under the lender’s extended fund facility.
Talks on a possible loan programme are expected to conclude early next year, with Kenya targeting an initial disbursement of about $725 million (about Sh7.4 billion) in the fiscal year that runs through June 30.
“Among objectives of the loan is the continuous support of Kenya’s Covid-19 response. We are also looking at areas of reduced debt vulnerabilities through a revenue-driven fiscal consolidation,” Yatani said.
The country’s debt burden is expected to worsen as the shilling sinks against international currencies, falling to 111.05 units against the dollar on Friday last week.
The public debt management report for 2019-20 by the National Treasury shows the portion of Kenya’s external debt held in dollar currency hit 67.3 as of June 30.