Kenya’s debt accrues to Sh304b since 2003

By Steve Mkawale

The Government has incurred a total of Sh304.4billion in external debt over the last eight years, a cabinet minister revealed to parliament Wednesday.

Finance Minister Njeru Githae said the amount was obtained from a number of creditors, including the World Bank, International Monetary Fund (IMF) and the Government of Japan.

Mr Githae, however, assured the House that the total public debt is manageable as it currently stands at 47 per cent of the Gross Domestic Product (GDP).

“Our debt situation is manageable and sustainable, if it goes beyond 50 per cent of the GDP, then it will become unsustainable. The Government has not been engaged in any reckless borrowing. The budget deficit currently stands at 6 per cent,” he said.

He further assured members that the repayment of the loans will not affect the envisaged county governments as it is charged on the Consolidated Fund ruling out any possibilities of the country experiencing a situation like that in the Euro Zone countries.

"We only have one government. Counties are just entities and will have nothing to do with the national debts already incurred. But in future, each county will have to repay any external debts they incur, the government will only guarantee the loans," said the minister.

He was responding to questions by MPs over the national debt incurred by the Government since 2003 and how the State would repay such debts.

Wajir South MP Mahamed Sirat had asked the minister to provide details of the projects that were funded using the loans, indicating their respective costs.

Githae confirmed that the funded projects using donor funds were prioritised in line with the country’s development agenda arguing that they were distributed evenly across Kenya.

The minister tabled a schedule of loans contracted by the government of Kenya from January 2003 to end of October 2011 indicating the projects funded the creditor and borrower of the loans and how outstanding debt was disbursed.

The schedule contains national projects that have since been funded through loans from organisations such as International Fund for Agriculture, International Development Association, African Development Fund, GTZ, Economic Development Cooperation Fund-Korea and European Investment Bank among others.

Among the key companies the government guaranteed loans includes Kenya Electricity Generating Company (KenGen) and Kenya Ports Authority (KPA).

The government guaranteed KenGen loans for five projects, three with the funding from Japanese government and two funded by German Government (GTZ).

The KenGen Projects are the Sondu Miriu Hydro Power II (Sh13.3 billion), Sondu-Miriu hydropower project-Sang’aro power plant (Sh4.2b), Rehabilitation and expansion of Kindaruma hydropower plant (euro 39.1b), Olkaria 1Unit 4 and 5 geothermal power project (Japanese Yen 29.5b) and rehabilitation and upgrade of the Olkaria geothermal plant (Euro60m).

Mombasa Port Development programme got a loan guarantee through the government of Sh1.3 billion from Japan Government.

But members caused a storm over the manner in which the Government allocated the borrowed funds claiming some areas were left out.

Karachuonyo MP James Rege who is also the chairman of the parliamentary committee on Energy and Communication took issue with treasury for guaranteeing Kenya Broadcasting Corporation (KBC) a huge loan from Japan Government to purchase Medium Wave (MW) radio broadcast equipment when the world was moving to latest technology of Frequency Modulation (FM).

Githae regretted that the previous regime had agreed to the arrangement that saw the Japanese authority dump obsolete equipment saying the Government was currently re-negotiating the deal to see whether the loan would be converted into a grant.

“We are negotiating with the Japanese government with the aim of converting the debt to KBC so that the government can take up the loan. There is no way KBC will be able to repay the loan. We don’t blame the lender, we blame the borrower,” said the minister.