Economy
President Ruto takes eight new loans in four months
Friday March 24 2023
Prof Njuguna Ndung’u, Cabinet Secretary for National treasury and planning on October 18, 2022. PHOTO | DENNIS ONSONGO | NMG
The Kenya Kwanza administration contracted eight new loans worth Sh43.4 billion in the four months between September 1 to December 31.
Treasury says the new loans signed between the Kenyan government, and commercial bilateral and multilateral creditors will be repaid between 2030 to 2047.
“The total value of the eight loans signed is equivalent to Sh43,381, 450,293. Two of the loans had been disbursed by the time of submitting this report,” Njuguna Ndungu, the Treasury Cabinet Secretary said in a brief to MPs.
President William Ruto’s government is counting on concessional loans to retire the short-term expensive loans that have worsened Kenya’s cost of servicing debt.
The Public Finance Management Act requires the Treasury to update Parliament on all loans contracted by the national government every quarter.
Treasury explains that the proceeds of the loans will be used to finance water projects, food and nutrition security, maternal health, informal sector improvements and Small and Medium Enterprises (MSMEs).
The Treasury borrowed Sh16.7 billion from the International Development Association to increase the sustainability access and management of groundwater in the Horn of Africa’s borderlands.
“The loan will be repaid in 40 equal semi-annual repayments. The interest rate of the loan is 1.25 percent per annum and the service charge is 0.75 percent per annum on the withdrawn credit balance,” the Treasury said.
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The government also borrowed Sh2.7 billion from Mizuho Bank Europe NV that will be used for Turnkey medical equipment and refurbishment package contracts to upgrade maternal and newborn units of 20 sites.
“The purpose of the loan is to finance amounts payable to the exporter under the Export Contract in respect of eligible goods and services,” the Treasury documents state.
A further Sh5 billion will go towards building resilience for food and nutrition security in Djibouti, Kenya, Somalia and South Sudan.
The money, to be paid over 30 years, was secured from the African Development Fund.
The Treasury further signed a Sh2.5 billion loan from the Federal Republic of Germany to finance goods and services to improve waste and water management in Kisii and Kericho counties.
“The loan will be repaid in 60 equal semi-annual instalments of EURO 300 000 from 15th May 2033 to November 15, 2062,” the report states.
“The interest rate of the loan is 0.75 percent per annum on the disbursed loan amounts. The commitment charge rate is 0.25 percent per annum on undisbursed loans.”
Kenya also signed a Sh2.59 billion with the International Fund for Agricultural Development (IFAD) to deepen rural financial inclusion and green investments.
The purpose of the loan is to create equitable employment opportunities, innovative and resilient production systems as well as increase incomes for smallholders, poor and marginalised rural households, women and youths.
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Kenya also took in loans from Germany (Sh7.8 billion) and France (Sh6.2 billion) to help establish a centre for entrepreneurship including satellites together with an integrated voucher system and primarily to pay the foreign exchange costs.
The money secured from the Agence Francaise De Development will support the second Kenya Informal settlements improvement project.
