Kenya’s loan spree: Government borrowed Sh23.83 million per hour in four months

Kenya borrowed Sh68.7 billion between September and December 2024, according to a National Treasury report presented to Parliament. (Photo: National Treasury)

By Lucy Mumbi
Monday, February 17, 2025

The document reveals that the government secured 18 new loans from both bilateral and commercial creditors during the four months.

Kenya borrowed Sh68.7 billion between September and December 2024, which translates to Sh572 million every day, according to a National Treasury report presented to Parliament.

The document reveals that the government secured 18 new loans from both bilateral and commercial creditors during the four months.

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Three of these loans were denominated in euros and sourced from three bilateral lenders, while the remaining 15 were in Chinese yuan, acquired from the China Development Bank (CDB). This borrowing translates to Sh17.2 billion per month, Sh23.83 million per hour, and Sh397,292 per minute.

The bilateral loans, which will be repaid in euros, attract interest rates ranging from 0.25 per cent to 1.23 per cent annually. Some also carry an annual commitment fee of 0.5 per cent and an upfront fee of 0.25 per cent of the total commitment. Meanwhile, all the CDB loans, which must be repaid in yuan, come with an annual interest rate of 4 per cent and an upfront fee of 0.5 per cent.

This borrowing spree comes at a time when concerns are growing over the sustainability of Kenya’s public debt, which has surpassed Sh12 trillion.

The country’s revenue collection remains depressed, and the foreign exchange market continues to experience turbulence. Treasury data indicates that Kenya’s debt servicing obligation for the 2024/25 financial year is Sh1.85 trillion.

In October 2023, Parliament replaced the Sh10 trillion debt ceiling with a debt anchor set at 55 per cent of the GDP in net present value terms. However, this target is expected to be achieved by 2029, as the current debt level stands at 62 per cent of GDP.

The funds from the euro-denominated loans are allocated for projects such as the National System Control Centre (NSCC) for the electricity grid, Kenya Reform Financing, and budgetary support. A Sh20.3 billion loan from Italy, for instance, is intended to stabilise the economy, reduce greenhouse gas emissions, and support climate-related institutional reforms.

It will also finance urban transport, forestry, land use, and climate finance programmes. The loan, which will be repaid between 2032 and 2045, carries an annual interest rate of 1.23 per cent.

“The commitment fee is 0.25 per cent per annum on the available commitment and an upfront fee of 0.25 per cent of the commitment,” the Treasury states in the report.

Germany has provided Sh8.1 billion through the Kenya Reform Financing initiative to support “reform-oriented expenditures of the Kenyan budget.”

“This is to promote the transition to a more resilient, greener and more inclusive economy in line with the Bottom-Up Economic Transformation Agenda,” the document adds.

The loan, which will be repaid in euros over 13 years, carries an interest rate of 1.2 per cent, with a 0.25 per cent commitment fee on undisbursed amounts.

A Sh4.6 billion loan from France will be used to build a stable and cyber-resilient NSCC. This loan, which will be repaid in euros between July 2030 and January 2045, has an annual interest rate of 0.8 per cent.

The CDB loans are primarily earmarked for infrastructure projects. A Sh4.6 billion loan will finance the construction of the Barpello-Tot-Sigor-Marich Pass (B17) road and the Tot Junction-Chesegon-Kopasi River road, with repayment set to conclude in 2031.