Kenya yet to utilise Sh1.3 trillion in external loans - CS Mbadi
Treasury Cabinet Secretary John Mbadi revealed that these unutilized funds continue to accrue commitment and interest fees.
Kenya has not yet tapped into approximately Sh1.3 trillion in loans from external lenders, even as the country faces growing pressure from its mounting public debt.
Treasury Cabinet Secretary John Mbadi revealed that these unutilized funds continue to accrue commitment and interest fees, which are ultimately impacting the Kenyan public through higher taxes, implemented to meet loan repayment obligations.
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While appearing before the National Assembly Finance and Budget Committee on Tuesday, Mbadi confirmed the significant amount of committed but unused funds.
“I am being reminded here that we have about Sh1.3 trillion in committed funds that have yet to be disbursed,” he stated.
However, he noted that certain development partners provide sector-specific funds, which the government is unable to use freely, causing delays in disbursement.
“You find some of these development partners come in, they just apply for it. They come and say, we have money here, and then the government decides to take that, so then you find there is no provision for counterpart funding, then the money remains unpaid,” Mbadi explained.
As of January 2025, Kenya’s total public and publicly guaranteed debt stood at Sh11.02 trillion, or 65.7 per cent of the country’s Gross Domestic Product (GDP).
This is a notable increase from the Sh10.58 trillion, or 65.7 per cent of GDP, reported in June 2024.
The GDP forecast for January 2025 is pegged at Sh16.76 trillion. External debt, in particular, amounted to Sh5.09 trillion as of January, a decrease from Sh6.09 trillion in December 2023, due to a strengthening Kenyan shilling against the US dollar.
IMF financing
In addition to the mounting debt, Kenya is seeking more external financing from the International Monetary Fund (IMF).
This comes as the IMF concludes its eighth review of the country’s economic performance for this year.
The government aimed to secure $3.6 billion (Sh464.4 billion) from the IMF’s Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) programmes.
However, the IMF confirmed that the review, which was intended to assess Kenya’s adherence to agreed-upon economic reforms, would not proceed. Instead, Kenya has formally requested a new loan program, which has led to fresh negotiations between the IMF and the Kenyan authorities.
While pursuing these additional loans, Mbadi continues to work on reducing the country’s debt-to-GDP ratio, which currently stands at 65.7 per cent. He aims to bring this down to 52.8 per cent by 2028, which is below the benchmark rate of 55 per cent.
“I plan to reduce the cost of debt by reducing nominal debt to GDP to 57.8 per cent from the current 65.7 per cent, and the present value of debt to GDP over the medium term,” Mbadi explained.
He also intends to reduce refinancing risks by lowering the amount of debt maturing in one year and extending the debt maturity in both the domestic and external portfolios.
To tackle foreign exchange risks, Mbadi revealed plans to reduce the foreign exchange risk from 49.3 per cent to 44.6 per cent by focusing more on domestic borrowing.
“The 2025 debt management strategy aims to optimise access to external compensation and borrowing and undertake liability management to minimize the costs and risks in the debt portfolio,” Mbadi concluded.
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