Kenya and Austria have signed a 40 million Euros (Sh6.2 billion) concessional loan facility after four years of negotiations.
The agreement was signed by Austrian Ambassador Christian Fellner and Treasury CS Njuguna Ndung’u this week.
In a statement on Friday, Austria Embassy Commercial Counsellor Edith Predorf said the agreement aims to bolster financial cooperation between the two nations and facilitate the provision of concessional loans under the Austrian Soft Loan Scheme.
According to Austria's Ministry of Finance, the scheme loans contribute to the realisation of sustainable projects by Austrian exporters in selected developing countries through the use of grants and below-market interest rates.
"Soft Loan financing is provided in the form of tied aid credits, i.e. it is restricted to the export of mainly Austrian goods and services," reads the statement.
The loan advanced to Kenya will support projects of mutual interest in water, energy, health, and education sectors.
“The framework agreement signals a new era of collaboration and development between Kenya and Austria, fostering even stronger ties and creating opportunities for growth in various sectors," Predorf said.
"It is anticipated that this agreement will not only enhance financial cooperation but also stimulate trade relations,” he added.
Kenya's total public debt stands at 67 per cent of GDP according to the World Bank, and President William Ruto has moved to seek cheaper loans.
In November last year, Ruto said his government would no longer borrow money at interest rates of more than 10 per cent, adding that the cost of debt had become “unacceptable”.
Predorf says one of the key outcomes of the deal is the encouragement it provides for Austrian companies to invest in Kenya in the identified sectors.
"This investment is poised to bring about substantial economic benefits and contribute to the sustainable development of Kenya. With the green light from the agreement, some vital projects can now move forward, positively impacting the lives of millions in Kenya and vastly improving their livelihoods," she added.
The embassy says the facility will bolster Kenya's capacity to undertake transformative projects and achieve sustainable growth.
According to the Observatory Economic Complexity data, in 2021, Kenya exported $1 million worth of goods to Austria, with the main products being coconut and other vegetable gibers ($212,000), cermets ($206,000), and tea ($204,000).
In the last 26 years the exports of Kenya to Austria have decreased at an annualized rate of 6.06 per cent, from $5.29 million in 1995 to $1.04 million in 2021.
However, Predorf notes that exports from Kenya to Austria increased by 25 per cent in 2022.
In 2021, Austria exported $23.4 million worth of goods to Kenya, with the main products being flavored water ($3.51 million), Kraft paper ($2.34 million), and antibiotics ($1.79 million).
In the same period, the exports of Austria to Kenya have increased at an annualized rate of 5.2 per cent, from $6.24 million in 1995 to $23.4 million in 2021.
