June 14, 2024

Government on spot over Ksh.213 billion suspicious loans 

3 min read
Government on spot over Ksh.213 billion suspicious loans

Public Debt and Privatisation Committee raises concern over suspicious government loans amounting to Ksh.213 billion

Public Debt and Privatisation Committee raises concern over suspicious government loans amounting to Ksh.213 billion.

The government-backed loans, whose specifics are undisclosed, have drawn the ire of the Public Debt and Privatization Committee, which has warned that they run the risk of subjecting the nation to severe fines.

According to the report presented to the National Assembly, Kenya obtained 19 externally financed loans totaling Ksh. 213.24 billion from international creditors between May of last year and April of this year, of which less than 11 percent had been released.

In its report, the committee noted that six loans totaling Ksh. 105.06 billion were obtained between May and August of last year; eight loans totaling Ksh. 43.38 billion were obtained between September and December of last year; and five additional loans totaling Ksh. 64.8 billion were obtained 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.

And with no information on loans taken on behalf of government entities for social impact programmes, the committee warned of a liability exposure.

As at June last year, the Controller of Budget flagged Ksh.218.8 billion worth of non-performing loans; the number is expected to have risen.

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The committee also discovered that several of the loans had provisions that concealed their true cost and that there was little knowledge of the precise projects they were backing.

The Controller of Budget, who spoke before the committee, also questioned why some loans were made in different currencies from those that would be used for repayment, which drove up the cost of the loans in part because of exchange rate fluctuations.

The committee advised that the National Treasury digitize the loan approval and monitoring system to increase transparency and accountability and that Treasury should give comprehensive information to the National Assembly on Kenya’s debt in order to permit an audit of the country’s debt to determine if there was value for money.

They also proposed that loans should fund projects with high financial returns to ease the burden of repayment, this amid a revelation that most of the new loans they had flagged will be maturing in 2027, an election year and also a time when there will be repayment of older loans meaning the government will be over-pressured and likely to default on the loans.

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