Controller of Budget: Kenyan taxpayers lost Sh1.89bn to undisbursed loans
Taxpayers in Kenya have shelled out Sh1.89 billion in commitment fees between July 2022 and September 2023 for loans that remain undispersed, according to revelations by Controller of Budget Dr. Margaret Nyakang’o.
Taxpayers in Kenya have shelled out Sh1.89 billion in commitment fees between July 2022 and September 2023 for loans that remain undispersed, according to revelations by Controller of Budget Dr. Margaret Nyakang’o. Speaking before the National Assembly Committee on Public Debt and Privatization, Dr. Nyakang’o expressed the need for greater transparency in managing the Consolidated Fund Services (CFS) expenditures, urging the National Treasury to provide detailed breakdowns of costs and debt-funded projects.
Undisbursed loans and commitment fees
Dr. Nyakang’o disclosed that the Sh1.89 billion commitment fees included Sh499 million in external loans repayments. Commitment fees, typically associated with undisbursed loans, are charges imposed by lenders to compensate for reserving funds for borrowers. The Controller of Budget emphasized the importance of the National Treasury providing explanations for inflated CFS budget estimates related to salaries, allowances, and miscellaneous services, which are often later revised downward.
Calls for transparency and accountability
Addressing the Committee, Dr. Nyakang’o stressed the importance of effective budget implementation, suggesting that taxation and fiscal consolidation should be aligned to reduce reliance on borrowing. She urged the Treasury to review International Monetary Fund (IMF) policies, asserting that certain policies negatively impact the country’s budget implementation and overall economic well-being.
Growing concerns on pension wage bill
Highlighting a growing concern, Dr. Nyakang’o warned of an increasing pension wage bill, identifying it as a potential threat to economic growth. Documents presented before the committee indicated a cumulative expenditure of Sh44.73 billion between July and November 2023. To address the escalating costs, the Controller of Budget recommended fast-tracking the conversion of pension and gratuities from defined benefit to defined contribution.
Addressing public debt sustainability
Dr. Nyakang’o emphasised the urgency of reviewing the government's borrowing policy to ensure the sustainability of public debt in the medium to long term. She advocated for measures such as public debt restructuring and engagements with bilateral creditors to reassess debt repayment terms. The Controller of Budget underlined the need for accurate recording of public debt, aligning borrowed funds with relevant projects for a more transparent and accountable financial system.
Parliamentary concerns and public accountability
Kitui Central MP Makali Mulu echoed concerns over the unutilized funds for loans paid as commitment fees, calling for a thorough investigation into the whereabouts of the money. Dr. Makali emphasized the necessity of understanding why these loans, some dating back a decade, have not been utilized.
In conclusion, Dr. Nyakang’o’s revelations highlight the critical need for a comprehensive review of financial policies, increased transparency in government expenditures, and strategic measures to address the growing challenges posed by the undisbursed loans and escalating pension wage bill. As the government navigates these fiscal challenges, questions surrounding accountability and the effective utilization of public funds take center stage.
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