The Africa Centre for Open Governance (AfriCOG) has launched the ‘Kenya’s Debt Treadmill: The China Portfolio 2000 – 2024’ report.
The report addresses Kenya’s unsustainable foreign debt, focusing on its external debt and governance issues, particularly its debt to China, which is Kenya’s largest bilateral creditor.
The recent Forum on China-Africa Cooperation (FOCAC) provided an opportunity to review long-term credit arrangements between Kenya and China within the Belt and Road Initiative context.
Currently, according to the report, over 22 percent of national revenue is paid to foreign lenders. In the 2023-2024 financial year, interest payments on foreign debt consumed nearly 10 percent of government revenues, equivalent to 1.4 percent of GDP.
A further 1.8 percent of GDP goes on principle repayments for foreign loans, equal to 12.6 percent of revenue. Cumulatively, taxpayers spent two times more on foreign debt repayments than was available for development expenditure for all the 47 County Governments.
In the 2023-2024 financial year, Kenya took out 36 new foreign loans totaling KSh 898 billion, with 27 from multilateral lenders, 6 from commercial banks, and 3 from bi-lateral lenders.
Kenya paid over half a trillion shillings in external principal repayments last year, and over 330 billion falls due in 2024. Between 2025 and 2027, the National Treasury must repay over 1.5 trillion shillings to foreign creditors.
The report is part of a planned series on Kenya’s debt, with AfriCOG also examining agreements with other bilateral, multilateral, and commercial lenders.
AfriCOG’s focus is on the conduct, attitudes, and policies of the Kenyan government and its officials regarding foreign borrowing. It is they who must act in the best interests of the people and be transparent, as the public will ultimately repay the debts.
Speaking during the report launch, AfriCOG Executive Director Gladwell Otieno said: “The public is not consulted or informed about the debt details, and even Parliament is kept out of the loop. The principle of ‘no taxation without representation’ implies ‘no borrowing without representation’. Parliament must use its authority to control the Executive’s appetite for debt contracting and ensure the reduction of foreign loan costs to prevent higher taxes for future generations. The Constitution requires inter-generational equity. It’s no wonder the Gen Z is furious at being forced to repay misappropriated debt.”
Instead of exercising their budget making and control powers, Otieno added that since 2013, successive Parliaments have kowtowed to the Executive and undermined the strict constitutional regime that limited and regulated national debt.
“Most notoriously, in May 2014, Parliament facilitated the first Eurobond by making changes in the Public Finance Management Act which ended in scandal when over half the loan proceeds (US$ 1 billion) went completely missing after being banked abroad”, she noted.
According to AfriCOG, the PFMA amendments of May 2014 opened the door to unrestricted external borrowing starting with the Eurobond of 2014 which continues to this day. A lot of loan proceeds are misspent or stolen, and the nation’s debt register is littered with commercial loans for white elephant or even ghost projects. A primary tool for this is the amendments to the PFMA.
The amendments created a much-abused loophole allowing disbursal of loan proceeds through bank accounts outside Kenya, even though the Constitution requires all loans to be paid into the Consolidated Fund, consisting of the National Exchequer Account at the Central Bank of Kenya.
Worse, the PFMA amendments allowed payments to contractors, suppliers and so-called transaction advisors abroad, outside the purview of the Controller of Budget and the Auditor General.
“Parliament must take full control of the budget making process in keeping with the Constitution. It must require the Executive to provide information on how much Kenyans owe, for what projects and on what terms to the people of Kenya; and also, to require the Executive to seek prior approval of the Parliament before signing any future loan agreements,” it stated.
From left: Lawyer and Governance Expert Mwalimu Mati, Africa Center for Open Governance (AfriCOG) Executive Director Gladwell Otieno and National Coordinator of The Institute for Social Accountability Diana Gichengo during the launch of the report on Kenya’s debt situation.
