Kenyans are paying billions as commitment fees for loans taken by the government but only partially drawn, in some cases long after the expected completion date of projects, according to a report by the Auditor General tabled in the National Assembly.
Ms Nancy Gathungu, in her report tabled before the National Assembly Liaison Committee, regretted that failure to draw the loans for the intended projects leads to wastage of funds.
“Some of the projects have clauses where they attract commitment fees for any undrawn amounts leading to wastage of funds and lack of value for money,” reads the report.
Ms Gathungu says donor funded projects continue to attract low absorption of funds with a total of Sh515 billion not utilised at the end of the 2023/24 financial year.
“Some of the projects were ending, posing risks that the project would end without implementing all the planned activities and therefore not meeting the planned objectives,” reads the report.
Although Ms Gathungu did not state the exact cumulative amount Kenyans are paying as commitment fees, the Parliamentary Budget Office had in its analysis this year placed the figure at Sh18.9 billion in the last eight years.
“By June 2024, Kenya had contracted but not yet disbursed debt totalling Sh1.38 trillion resulting in approximately Sh1.58 billion in commitment fees. Between June 2026 and June 2024, the country cumulatively incurred a total of Sh8.9 billion in commitment fee for undisbursed loans underscoring the financial burden of underutilised borrowed funds,” reads the PBO report in its assessment of the 2025/2026 budget proposals.
According to Ms Gathungu report, among the projects that continue to attract commitment fee include the East Africa Skills Transformation and Regional Integration Project which was to run for five years from 2018 to 2024.
However, Ms Gathungu says in her report that as at June, 2024, the project has drawn EUR5, 328,282 which is equivalent to Sh526, 361,538 leaving undrawn balance of Sh137, 330,791 for the remaining one year period.
The Audit report also listed the Mombasa Gate Bridge Construction Project loan agreement was to be implemented within seven years from December 5, 2019 with the targeted completion date June 30, 2027.
However as at June 2024 with over four years of the project duration lapsed, only Sh938 million representing two percent that had been drawn leaving Sh48.108 billion or 98 per cent of donor commitment undrawn.
Another project cited in the report is the Kapchorwa-Suam-Kitale and Eldoret bypass road project which had an undrawn balance of Sh8. 2 billion which represents 35 per cent of the expected total funding by September, 2023.
The report further says the National Urban Transport improvement project loan had undrawn balance of Sh16 billion representing 84 per cent of the donor funding with the project having been scheduled to be finalized by June 30, 2024.
Ms Gathungu says in her report that the multinational Horn of Africa Isiolo-Mandera Corridor (Elwak-Rhamu Road) upgrading project had drawn only an amount of Sh16, 046,300 representing 0.07 per cent of the total commitment as at June 30, 2024 compared to 40 per cent of the project period which had already elapsed.
She also cited the Eastern Africa Regional Transport, Trade and Development Facilitation Project which was started on July 20, 2015 and was expected to end by December 29, 2024.
However, as at June 30, 2024 a total of Sh45 billion had been drawn from the donor commitment of Sh49.28 billion leaving an undrawn balance of Sh4.08 billion.
Ms Gathungu says according to clause 2.03 of the financing agreement, the loan will continue to attract a penalty on the undrawn balance in form of commitment fees.
Ms Gathungu has now expressed concern that the low allocation and under-expenditure of the development budget implies that some services are not delivered.
“This is likely to affect the rate of development in the country as envisaged in the National Development plan, 2030 and achievement of critical sustainable development goals (SDGs).
In addition, Ms Gathungu says the undrawn money means that the projects funded through external borrowing adds to public debt and includes financing costs, penalties and commitment fees that further lead to higher costs for the taxpayers.
