The government has yet to utilise about Sh1.3 trillion from external lenders, even as the nation struggles with mounting debt pressure. As a result, Kenyans are bearing the brunt of delayed fund utilisation through increased taxes, which are imposed to facilitate loan repayments.

Treasury Cabinet Secretary John Mbadi, who appeared before the National Assembly Finance and Budget Committee on Tuesday said these loans continue to accrue commitment and interest fees despite remaining unutilised.

“I am being reminded here that we have about Sh1.3 trillion in committed funds that have yet to be disbursed,” he stated.

He defended this by saying that some of the development partners are sector specific thus the amount cannot be used by the government even when it wants to.

“You find some of these development partners come in, they just apply for it. They come and say, we have money here and then the government decides to take that, so then you find there is no provision for counterpart funding then the money remains unpaid,” he added.

The current stock of public and publicly guaranteed debt, according to a report by the ministry, stands at Sh11.02 trillion which is 65.7 per cent of the gross domestic product (GDP) as at the end of January 2025, up from Sh10.58 trillion, representing 65.7 per cent of GDP in June 2024.

The forecasted January 2025 GDP currently stands at Sh16.76 trillion.
Out of this, external debt accounts for Sh5.09 trillion as of January this year, down from the Sh6.09 trillion reported in December 2023 on account of the strengthening Kenyan shilling against the greenback.

This even as the government is still pursuing more external loans from the International Monetary Fund (IMF) which concludes its eighth review this year.

Extended Fund Facility

In to the ninth review, the country targeted to secure $3.6 billion (Sh464.4 billion) of the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) programmes. But in a statement, the IMF confirmed that the review, which was expected to assess Kenya’s compliance with agreed economic reforms, would not proceed. Instead, the Kenyan government has made a formal request for a new loan program, prompting fresh negotiations between the two parties.

“The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward,” IMF said.

This factor, much as it is aimed at facilitating government’s spending among other economic impacts, serves as a setback to Mbadi’s debt management plans in that it still affects the country’s debt ratio to the GDP-currently at 65.7 per cent, that he wants to bring down to 52.8 per cent below the benchmark rate of 55 per cent in the next three years.

During a separate meeting with the National Assembly departmental committees, the CS said he plans to make this possible through reduction of the cost of debt by reducing nominal debt to GDP to 57.8 per cent from the current 65.7 per cent and the present value of debt to GDP over the medium term.

He also plans to reduce refinancing risks through lowering the debt maturing in one year as a percentage of GDP and lengthening the debt maturity both in the domestic and external portfolio.

Further, Mbadi stated that he was planning to reduce the foreign exchange risk from 49.3 per cent to 44.6 per cent by focusing on borrowing more from the domestic debt market which in this regard serves as the best option while trying to counter foreign exchange related risks.

He said: “2025 debt management strategy aims to optimise access to external compensation and borrowing and undertake liability management to minimize the costs and risks in the debt portfolio.”