Government borrowed Sh138b in four months,  Treasury report shows 

The government borrowed Sh1.1 billion every day between January 1 and April 30 to finance development projects, a new report has revealed.

A report by the National Treasury shows that the government took nine new loans worth Sh137.9 billion with the repayment mode being in dollars and Euros set to commence in 2040.

The report tabled by leader of Majority in the National Assembly Amos Kimunya last week shows that the loans have been contracted between the Kenyan government and commercial and multilateral creditors.

Of the nine loans, six are from multilateral lenders and three are from bilateral lenders. Two of the loans have already been disbursed.

Nine loans

This is the first time the government has avoided commercial loans from the local and foreign market that attract higher interest rates.

“This section contains nine new loans contracted between the government of Kenya and bilateral and multilateral creditors. The total value of the nine loans signed is equivalent to Sh137,934, 659,733,” the report reads.

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 amortisations on new loans obtained from outside Kenya or denominated in foreign currency,” reads Section 31 (3) of the PFM Act.

Last year, the National treasury released a similar report covering between April 1, 2021 and August 31, 2021 where it signed ten loans totaling to Sh293.55 billion to help fill the Sh930 billion fiscal deficit in the Sh3.02 trillion Budget for the 2020/21 financial year.

Debt ceiling

The signing of the new loans comes just days after the National Treasury revealed that it had prepared amendments to raise the public debt ceiling that currently stands at Sh9 trillion.

The amendments to the Public Finance Management Act 2012 and its attendant regulations have already been submitted to the Cabinet for consideration.

As at the end of March, the provisional nominal debt stock including guaranteed debt stood at Sh8.4 trillion equivalent to 67.8 per cent of the GDP which is against the PFM act 2012 public debt ceiling of Sh9 trillion.

The public debt stock is projected to be Sh8.6 trillion as at end June 2022 against the current debt ceiling of Sh9 trillion.

Of this, the domestic debt stands at Sh4.2 trillion equivalent to 33.8 per cent of the GDP and attracts an average interest cost of 12.21 per cent per annum while the external debt stands at Sh4.2 trillion equivalent to 34 per cent of GDP.

Kenya’s major external creditors include the World Bank with 27.8 per cent, African Development Bank (18.7 per cent), International Monetary Fund (5 per cent) and China (18 per cent).