Kenya pays Sh1.7bn to bag foreign loans

The Controller of Budget (COB) Mrs. Margret Nyakango has flagged the National Treasury for Sh1.65 billion paid to secure future loans arguing that borrowings should now be cancelled to ease the burden of payment on taxpayers.

The amount is paid as commitment fees charged on borrowers for credit that has not been advanced as a way of guaranteeing that a lender will keep the funds. Nyakango told Parliament that the loans are being sought to undertake 17 projects including road construction,  expansion of Jomo Kenyatta International Airport (JKIA), power connections and construction of a dam to smoothen water supply to Nairobi and road construction.

Treasury headed by CS Ukur Yatani paid the fees for loans to Chinese, Japanese and European banks at the end of June piling pressure on the country’s bulging debt which now stands at more than Sh7 trillion.

Nyakango’s red flag on loan applications comes at a time Kenya’s maturing debt has piled pressure on the country’s expenditure plans and sliced funds meant 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,” Nyakango said.

Her call also comes after Yatani’s docket had committed Sh225.08 million to secure  loans meant for funding the installation underground power transmission lines in up market estates of Westlands, Kileleshwa, Riverside and Parklands. The Treasury also committed Sh21.447 million to secure loans for construction of a second runaway at the JKIA.

But on top of the list are fees to secure loans for an underground electricity transmission line to State House, Ngong Road and neighboring areas at Sh393.8 million and Sh304.58 million for construction of the second phase of Ruiru dam.

Mrs Nyakango blamed the ineptitude of government agencies tasked with implementing the projects as the reason for the hefty commitment fees as she urged the State to ensure all projects are executed shield Kenyans from losing funds.

Commitment fees hugely contribute to the fees the country’s growing loan repayment burden. More debts are also falling due to deficits in the  budgetary allocations as the pandemic continues to ravage the economy.

Kenya secured deals to suspend debt service with rich countries and other creditors including China in January and has budgeted Sh1.169 trillion which is 36.6% towards debt repayment in the year to June. The amount represents the highest component of spending for the financial year.