World Bank loans to Kenya have more than doubled those owed to China, making it the country’s biggest lender, a new report has revealed.
The report by Africog shows as of June 2023, World Bank loans were to the tune of Sh1.57 trillion compared to China’s Sh880 billion.
Treasury’s latest disclosures also reveal that World Bank loans were Sh1.7 trillion as of September 2024, while China’s share was Sh701 billion.
China has been perceived as the country’s biggest lender and critics point fingers at Beijing and accuse it of leading Kenya into a debt trap.
Among China’s big loans include Sh360 billion for SGR phase one, Sh148 billion for SGR 2, Sh38 billion for drilling materials and Sh18 billion for Nairobi Southern Bypass.
Others are Sh15 billion for Thika Superhighway, Sh11 billion for Nairobi ICD, Sh10 billion for Garissa solar project and Sh9 billion for Kenyatta University Teaching, Referral and Research Hospital.
The new disclosures show despite China being the country’s biggest bilateral lender with the highest amount, Kenya owes more to the other institutions.
African Development Bank is the third largest at Sh519 billion and Japan is the second largest bilateral lender at Sh166 billion.
As of September this year, IMF loans had grown to Sh423 billion from Sh335 billion, which was reported in June 2023, taking fourth place.
Africog further reports that of the Sh5.4 trillion foreign debt, Kenya owes Sh979 billion to Citigroup Global Markets–for its German and European branches.
Other commercial banks with huge portfolios include Trade and Development Bank (Sh216 billion), Afrexim Bank (Sh41 billion) and Standard Bank of South Africa (Sh28 billion).
Loans owed to the African Development Fund amounted to Sh313 billion as of June 2023, as per the Africog report, and Sh203 billion to the African Development Bank.
Kenya owed Sh152 billion multilateral to the International Bank for Reconstruction and Development.
Details show Kenyans owe Sh99 billion to two Italian banks for non-existent dam projects in Rift Valley–Itare, Arror and Kimwarer.
Also on the list of loans falling due are Sh2.4 billion owed to an Israeli Bank for the failed million-acre Galana Kulalu agricultural project.
In the lot is Sh9.6 billion worth of irrevocable promissory notes that were issued for security equipment, which never got to Kenya.
Kenya’s debt crisis has been turning the worse lately, with some institutions running into default, hence exposing taxpayers to avoidable charges.
Recently, Kenya Railways defaulted on repaying standard gauge railway loans after the corporation made a Sh50 billion loss.
President William Ruto acknowledged that the country’s debt burden was immense when he took over.
“In 2022, the country’s debt burden was not only immense but was also stacked up in a burdensome manner, leaving no room for investment in public services or development of critical infrastructure,” he told MPs.
Even so, details show Kenya Kwanza has yet to end the borrowing spree of the previous administration.
Analysis shows that in the year to June 30, 2024, the government took out 36 new foreign loans of Sh898 billion.
In what elucidates the burden on taxpayers, the government spent more than Sh500 billion to service external loans, with Sh330 billion falling due.
“Between 2025 and 2027, the National Treasury must repay more than Sh1.5 trillion to foreign creditors,” the Gladwell Otieno-led Africog said.
For the lobby group, “the 2014 Eurobond was the beginning of a treadmill of debt on which the Kenyan government is trapped, scrambling to borrow from Peter to pay Paul.”
The agitator says an amendment by MPs in 2014 was the point where the rain started beating Kenya on debt issues.
It argued the changes open floodgates for government officials to bypass parliamentary approval, hence borrowing and spending the proceeds without any controls.
Africog argues that in May 2014, “loopholes were surreptitiously inserted in the public finance management laws to permit the National Treasury and the Presidency to contract foreign debt outside the budget.”
It holds that the changes gave the presidency and Treasury a free hand to bank loan proceeds outside Kenya and outside the Consolidated Fund.
Africog argues the changes allowed the government to borrow on commercial terms for retiring commercial debts and to withdraw money from and to pay financiers and suppliers without the approval of the Controller of Budget.
“As all this happened, Parliament remained silent or played an enabling role by altering legislation to assist the Executive to borrow without fetters or limit,” the lobbyists said.
The lobby argues that “successive Parliaments since 2013 have kowtowed to the Executive and undermined the strict constitutional regime that limited and regulated national debt”.
Africog wants changes that MPs made to the Public Finance Management Act reversed, either by Parliament or by a judicial order.
“The PFMA amendments of May 2014 opened the door to unrestricted external borrowing starting with the Eurobond of 2014 which continues to this day. It is a matter of national urgency that the amendment is repealed or nullified by judicial declaration,” it said.
“A lot of the loan proceeds were misspent or stolen and the nation’s debt register is littered with commercial loans for white elephant or even ghost projects.”
It also poked holes in the Chinese loans, saying some of them are
shrouded in secrecy and hence were
never disclosed to taxpayers.
