Treasury Under Scrutiny: 19 ‘Mysterious’ Ksh.213B Loans
The Public Debt and Privatisation Committee has raised a red flag over government-guaranteed loans whose details are unknown, warning that they could expose the nation to astronomical fines.
Between May of last year and April of this year, Kenya obtained externally financed loans from international creditors totaling Ksh.213.24 billion, of which less than 11 percent had been disbursed.
In its report, the committee noted that six loans worth Ksh.105.06 billion were taken between May and August of last year; eight loans worth Ksh.43.38 billion were taken between September and December; and five loans worth Ksh.64.8 billion were taken between January and April of this year.
What was however alarming was that of the 19 loans, only 3 commercial loans had been disbursed, representing less than 11 percent; meaning the intended projects may not be realized by the time the period of repayment begins yet their completion may have helped to raise the resources needed to service the loans hence minimising pressure on the exchequer.
In the absence of information regarding loans taken out by government entities for social impact programs, the committee warned of a liability risk.
As of June of last year, the Controller of Budget had identified non-performing loans totaling Ksh 218.8 billion; this number is anticipated to have increased.
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In addition, the committee discovered that some of the loans contained clauses that concealed the actual cost of the loans, and that there was scant information regarding the specific projects that the loans were financing.
The Controller of Budget, who testified before the committee, also criticized the fact that some of the loans were taken in currencies other than that of repayment, which inflated the cost of the loans due to fluctuations in the exchange rate.
To facilitate an audit of Kenya’s debt to determine if there was value for money, the committee recommended that the National Treasury digitize the loan approval and monitoring system to increase transparency and accountability, and that the Treasury provide the National Assembly with complete information on the list of projects the loan will finance, the creditors, and the loan terms.
They also proposed that loans be used to fund projects with high financial returns to ease the burden of repayment. This was in response to the revelation that the majority of the new loans they had proposed will mature in 2027, which is an election year and also a time when older loans will be repaid, causing the government to be overburdened and likely to default on the loans.
Treasury Under Scrutiny: 19 ‘Mysterious’ Ksh.213B Loans
