The government is stuck with a Sh1.2 trillion public debt stock that lies idle even as it costs taxpayers over Sh100 million in monthly commitment fees, exposing its hasty borrowing where it seeks loans without plans on how to use them.
A commitment fee is charged by a lender to a borrower to compensate the latter for its commitment to advance. It is associated with unused credit lines or undisbursed loans.
This comes even as new details show that the government has been borrowing its own money locally, in billions of shillings belonging to public entities that are held by commercial banks but which Treasury cannot access. In recent reports, details by different agencies and a Parliamentary committee show that at least Sh1.179 trillion that the government has borrowed remains idle despite costing the taxpayer Sh680 million in commitment fees on the loans in the six months to December 2022.
The Parliamentary Committee on Public Debt and Privatisation now blames the situation on a disconnect between Treasury, which borrows the money and public agencies that are expected to implement projects and programmes with the loans.
The committee, in a report tabled before parliament on the 2023 Medium Term Debt Management Strategy (MTDS), found that the government is incurring significant losses through payment of commitment fees on undisbursed loans.
“Data availed to the committee puts this loss at Sh680.03 million in the first half of 2022/23. The total amount of the undisbursed loans is Sh1.179 trillion. The committee notes that there is a lack of preparedness by some implementing agencies to execute programmes funded through loans within reasonable timeframes which has led to a slow drawdown of the loans,” said the committee.
The report, signed by committee chairperson, Balambala MP Abdi Shurie, has recommended that Treasury undertakes a review of all the Sh1.179 trillion undisbursed loans and submits a report to the National Assembly within a month, “with information on terms, status, reasons for non-disbursement and proposals on any loans that can be canceled to save spending on commitment fees.”
The Auditor-General submitted that in 2021/22, the government lost Sh1.48 billion paid as commitment fees on loans that were not drawn.
The office, which exists to ensure accountability and value for money, has recommended a number of measures to seal the bleeding that reckless borrowing is causing on public coffers, including proper communication between Treasury which borrows and agencies that implement the debt-funded projects.
