Kenya borrowed Sh68.7 billion from September to December 2024, averaging Sh23.83 million an hour. The government secured 18 loans, primarily in Chinese yuan and euros, for infrastructure and economic stability initiatives amidst concerns over public debt exceeding Sh12 trillion. The revised debt ceiling allows a target of 55% of GDP by 2029, with fiscal management becoming increasingly critical.
In a four-month period, from September to December 2024, the Kenyan government borrowed a total of Sh68.7 billion, averaging Sh572 million daily, or Sh23.83 million hourly. This borrowing spree involved securing 18 new loans from both bilateral and commercial creditors, raising concerns about public debt sustainability, which currently exceeds Sh12 trillion.
Of the loans, three were in euros from bilateral lenders, while the remaining 15 were in Chinese yuan from China Development Bank (CDB). The loans obtained are allocated for projects such as the National System Control Centre (NSCC) and various road infrastructure initiatives. The monthly borrowing averages Sh17.2 billion and breaks down to Sh397,292 per minute.
The bilateral loans come with interest rates ranging from 0.25% to 1.23% annually, along with various commitment and upfront fees. In contrast, the CDB loans are burdened with a fixed annual interest rate of 4% and a half percent upfront fee. These financial obligations coincide with ongoing revenue collection challenges and fluctuations in the foreign exchange market.
Kenya’s debt servicing for the 2024/25 fiscal year is projected at Sh1.85 trillion. Recently, Parliament adjusted the debt ceiling to a new target at 55% of GDP by 2029, as the current level is at 62%. Funds from the euro loans will support economic stabilization and climate initiatives, among other projects.
Loans from Italy are specifically intended for climate reform, while Germany’s Sh8.1 billion loan aims to fund the Kenya Reform Financing initiative, focusing on promoting a greener economy. Other loans from France and CDB will finance crucial infrastructure projects, particularly road construction aimed at improving local connectivity across several counties.
In total, significant allocations from the CDB are directed toward road projects, including upgrades to major thoroughfares in counties such as Nandi, Kiambu, and Makueni. These projects aim to improve transportation infrastructure, with various repayment timelines set between 2027 and 2045.
The Kenyan government’s aggressive borrowing strategy is raising alarms about future fiscal sustainability. With existing budgetary constraints and the urgent need for infrastructure development, the government must navigate the complexities of managing public debt while fostering economic growth effectively.
Kenya’s recent borrowing has reached a staggering Sh68.7 billion over four months, highlighting a significant reliance on loans from bilateral and commercial lenders amid economic challenges. The focus on infrastructure development is evident, particularly through loans from CDB and other international partners, yet concerns regarding rising public debt remain prominent. The government’s fiscal strategy must balance immediate developmental needs against long-term financial sustainability.
Original Source: eastleighvoice.co.ke
