State in Sh421bn borrowing plan to fund Big 4 projects

In Summary

• Documents tabled in Parliament last week show that the loans pending approval or under negotiation as of September 30 are already planned for projects.

President Uhuru Kenyatta at State House, Nairobi, in September 2019.
President Uhuru Kenyatta at State House, Nairobi, in September 2019.
Image: PSCU

The government is in a race against time to secure new loans amounting to Sh421.9 billion to fund Big Four projects.

This is even as the National Treasury is rooting for external loans payable at lower interest rates for a longer period compared with commercial loans.

President Uhuru Kenyatta’s administration is bidding for a facility from African Development Bank (Sh94.2 billion), China (Sh86.9 billion), Japan (Sh83 billion), World Bank (Sh51 billion), AfD (Sh30.6 billion), South Korea (Sh15.9 billion), and Germany (Sh15.3 billion).

Others are IFAD (Sh12.4 billion), Middle East (Sh9.7 billion), France (Sh5.98 billion), Spain (Sh4.23 billion), European Investment Bank (Sh3.99 billion), Italy (Sh3.06 billion), Belgium (Sh2.83 billion), and Finland (Sh2.3 billion).

Documents tabled in Parliament last week show that the loans pending approval or under negotiation as of September 30 are already on projects.

The facilities could not be funded in the face of the country nearly breaking its borrowing cap, hence the recent move to peg the limit at Sh9 trillion.

By the time MPs were legislating the matter, the country could only borrow Sh180 billion amid the pressure of a Sh607 billion budget deficit.

There are already designed agreements for infrastructure projects (Sh149 billion), water and irrigation (Sh126.8 billion), as well as trade and manufacturing (Sh35.9 billion).

Others are for energy (Sh50.5 billion), housing (Sh35.3 billion), TVET (Sh13 billion), higher education (Sh3.4 billion), health (Sh3 billion), environment (Sh2.25 billion), basic education (Sh1.4 billion), and urban development (Sh912 million).

Part of the agreements for Thwake Dam whose loans of Sh4.9 billion and Sh21.9 billion from the Africa Development Bank (ADB) were signed and are awaiting the Attorney General’s legal opinion to be effective.

The Ministry of Energy has equally negotiated a Sh6.7 billion facility from ADB for the Ethiopia-Kenya highway electricity project. It is projected to be effective once a legal opinion is provided.

The Water ministry has sought two loans from ADB at Sh6.7 billion and Sh410 million respectively for the Nairobi River rehabilitation and restoration program.

ADB has equally submitted a Sh10 billion loan agreement to the Treasury Cabinet Secretary for signing to fund housing projects under the Kenya Mortgage Refinance Company.

The National Treasury is also at the tail-end of getting a Sh25 billion facility with the World Bank for affordable housing projects.

The project documents were cleared by the Attorney General for signature and are already submitted to the CS’s office for consideration, the loans report states.

Kenya is also negotiating a Sh33 billion facility with ADB for the Kenol-Sagana-Marua road upgrading project.

This is the case of Sh3.8 billion for TIVET and another Sh10 billion for phase three of the electrification of villages under the Last Mile Connectivity program.

State Department for Infrastructure has drafted a financing agreement for a concessional loan of Sh4.2 billion to fund works at the T-Mall flyover at Langata Road and build five footbridges across Mombasa and Langata roads.

The government is also set to get Sh14.3 billion from the World Bank for water security and climate resilience project.

By the time of filing the report, the government was in talks with the EIB and AfD for a Sh6.2 billion facility for the Lake Victoria Water and Sanitation project.

Sh2.2 billion funding from Germany’s KfW Bank for Kiambu Institute of Science and Technology is awaiting the resolution of a land ownership row.

The agreements have been cleared by the Attorney General for signing subject to resolution of the said dispute.

Loans for various ventures by the Water ministry have also been negotiated and are due to be forwarded to the AG for clearance.

Among them are monies for Nairobi Water, ASAL roads, construction of Jubilee Market in Kisumu, an engineering and science complex at the University of Nairobi, and for the Turkwel-Lokichar-Lodwar transmission line as well as substations.

The AG has cleared for signing, loans in respect of Kitui-Mwingi-Kandwia road project at Sh18 billion, upgrade of Kandwia-Tseikuru-Usueni road (Sh12.6 billion), Mzima II water supply (Sh29.3 billion) from China Exim bank.