World Bank tops list of Kenya’s external lenders

Treasury CS Ukur Yatani at the Villa Rosa Kempinsky, Nairobi, February 24, 2021. [Elvis Ogina, Standard]

The World Bank leads the pack of foreign creditors that will help Kenya finance its Sh3.6 trillion budget in the Financial Year (FY) 2021/22, reports from the National Treasury shows.

The Washington-based institution is expected to give the country Sh121.6 billion, with a big chunk of the money - about Sh18.1 billion going into infrastructural projects.

The State Department for Crop Development and Agricultural Research will get Sh17.8 billion.

The second highest financier will be the African Development Bank (AfDB) that is projected to give the country Sh50 billion.

The Ministry of Water, Sanitation, and Irrigation will get Sh17.4 billion of this kitty while infrastructure will get Sh14.1 billion. Funding from the World Bank and AfDB fits into the National Treasury’s plan of ensuring that much of the borrowing comes from multilateral lenders who give cheaper low-interest rates loans with longer grace periods and tenures.

“Official external sources for loans on concessional terms will be maximised while non-concessional, commercial external borrowing and sovereign bond issuance will be limited to projects with high financial and economic returns in line with government’s development agenda,” said National Treasury Cabinet Secretary Ukur Yatani.

Japan is the leading bilateral lender having committed to give Kenya Sh36.5 billion for the 12 months to June next year. Much of the money will be used to build roads, ports, and bridges while others will be used for budgetary support by the National Treasury.

China, which has for long been the leading bilateral lender to Kenya, will give Sh22.7 billion which will be funneled to energy, infrastructure including the Naivasha-Nairobi Standard Gauge Railway (SGR), water, and sanitation and ICT.

The third highest bilateral lender is France, Sh18.9 billion, Italy (Sh12.5 billion), Germany, Sh8.2 billion, and Spain, Sh2.9 billion. In total, the country is expected to get Sh319.2 billion from external lenders.

About 65 per cent of the money, Sh207.4 billion, will come from multilateral lenders including International Fund for Agricultural Development, United Nations Fund for Population Activities, Global Fund, European Investment Bank.

Bilateral lenders will Sh111.7 billion in the next financial year. Mr Yatani has been asking for a further extension of the debt repayment holiday from a few of the bilateral lenders which saw the country save close to Sh80 billion in debt service up to June.

Kenya is expected to spend Sh3.63 trillion in the FY2021-22. And with the State expected to collect just about Sh2 trillion in taxes, it will have to borrow the remaining Sh1.6 trillion from both local and external creditors to plug the deficit.

A big chunk of the loans, about Sh1 trillion (excluding grants), will be used to finance various development projects including President Uhuru Kenyatta’s Big Four Agenda which has been allocated Sh135.3 billion.The rest of the money, Sh613 billion, will be used to repay expensive external loans that will be maturing in the 12 months to June next year.

During this period, Treasury estimates it will receive external loans valued at about Sh904.7 billion. Slightly over a third of this cash, Sh291.3 billion, will be sunk into development projects.

Development activities including efforts to reboot the economy through the Economic Stimulus Package and the Post Covid-19 Economic Recovery Strategy will also be funded through local borrowing amounting to Sh661.6 billion.