Inability by treasury to ensure loan commitments totaling Ksh 1.38 trillion are disbursed on time will see taxpayers pay creditors Ksh 1.583 billion in commitment fees.
Parliamentary Budget Office is warning that the late disbursement of the loans secured from various creditors could derail economic and social programmes the funds are meant to finance.
“A notable concern is the increasing accumulation of non-disbursed committed loans. By June 2024, Kenya had contracted but not yet disbursed debt totalling Kshs. 1.38 trillion, resulting in approximately Kshs. 1.583 billion in commitment fees,” said the office.
According to the Budget Options for FY 2025/2026 and the Medium Term, between June 2016 and June 2024, the country cumulatively incurred a total of Ksh 18.9 billion in commitment fees for undisbursed loans. Commitment fee is a charge by lender for providing a loan to a borrower.
Parliament is now raising an alarm over the financial burden the underutilized borrowed funds pose especially on development programmes.
“The delays in the disbursement of loans defer the expected economic and social gains of the planned projects or programs. Given the developmental importance of these loans, particularly concessional ones from the World Bank with favourable terms such as low interest rates and extended grace periods, it is critical to ensure their timely utilization to avoid unnecessary commitment fees,” says parliament.
However, the office noted in the 16th Budget Options the success of the fiscal consolidation being undertaken by the government which has slowed the growth of public debt.
The report indicates that the stock of public debt had been increasing annually to peak in FY 2022/23 at 71pc of GDP in nominal terms before the government started implementing its fiscal consolidation efforts to try to tame the ballooning debt.
FY 2023/24 was the first time since FY 2011/12 that the country witnessed a reduction in the stock of public debt as a share of GDP, the office says.
The reduction was largely on domestic debt which reduced from 37pc of GDP in FY 2022/23 to 33pc of GDP in FY 2023/24 while external debt increased from 33pc to 34pc of GDP over the same period.
