Mandarins at the National Treasury have been exposed after it emerged that the government paid Sh6.6 billion in four years as commitment fees on undrawn loans procured from foreign lenders.
Auditor-General Nancy Gathungu made the revelations before the Budget and Appropriations Committee (BAC) of the National Assembly as MPs questioned the National Treasury’s commitment to prudent management of the “limited” public funds.
Auditor-General Nancy Gathungu.
Photo credit: Dennis Onsongo | Nation Media Group
The government paid the penalties between 2020/21 to 2023/24 financial years, at a time when the country continues to experience shortfalls in resource mobilization to finance critical expenditures like releasing capitation amounts in time to public primary, Junior school, secondary school and university education as well to health facilities for public-funded insurance card holders.
Ms Gathungu spoke as it emerged that of the Sh515.1 billion that was borrowed to finance the 14 capital-intensive projects, Sh304.4 billion had not been spent raising questions about why the loans were procured.
According to Ms Gathungu, some of the projects were lapsing, posing risks that the projects would end without implementing all the planned activities and “therefore not likely to meet the project objectives.”
“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,” Ms Gathungu told BAC chaired by Alego Usonga MP Samuel Atandi as she pushed for enhanced allocation to her office for the 2025/26 financial year.
Chairperson of the National Assembly's Budget and Appropriations Committee and Alego Usonga MP Samuel Atandi at the County Hall Nairobi on Wednesday, March 12, 2025.
Photo credit: Dennis Onsongo| Nation Media Group
The Auditor-General warned against continued pileup of undrawn amounts as Kitui Central MP Dr Makali Mulu, a member of BAC, led the committee members in pointing fingers at the National Treasury mandarins for deliberately seating on parliament resolutions “whose implementation would have enhanced fiscal discipline in the usage of public funds.”
“None usage of loan amounts among others are issues this committee has deliberated on and recommendations made and adopted by the House. Why the National Treasury is not keen to implement the resolutions is a matter that requires our intervention,” said Dr Mulu.
“How can someone give you funds and you are not using it?” posed the Kitui Central MP as Ms Gathungu challenged the committee; “it is time parliament took a decisive action on future borrowings.”
Section 12 (2) of the Public Finance Management (PFM) Act provides that the National Treasury shall promote transparency, effective management and accountability of public finances in the national government.
“The National Treasury shall ensure proper management and control of, and accounting for the finances of the national government and its entities in order to promote the efficient and effective use of budgetary resources at the national level,” the PFM Act states.
Documents presented to the committee by Ms Gathungu, indicate that Sh2.1 billion was paid in the 2020/21 fiscal period, accounting for the highest committee fees paid in a financial year over undrawn loan amounts in the recent past.
During the 2023/24 financial year, Sh1.6 billion was paid in commitment fees, Sh1.5 billion during the 2021/22 period and Sh1.44 billion in 2022/23 fiscal year.
The projects affected by the government’s failure to withdraw foreign loan amounts to finance them include the Sh1.1 billion East Africa Skills Transformation and Regional Integration project that was financed by the World Bank through the International Development Agency (IDA).
However, Ms Gathungu’s documents show that as at 30 June, 2024, the project had drawn Sh526.4 million, about 61 percent of the donor commitment “for the five years the project had been in operation,” leaving an undrawn balance of Sh137.33 million “for the remaining one-year period.”
There is also the Sh23.5 billion Kapchorwa-Suam-Kitale and Eldoret bypass roads project that had an undrawn balance of Sh8.23 billion, which represents 35 percent of the expected total funding, by September 30, 2023.
Further, the National Urban Transport Improvement project that had been scheduled to be finalised by June 30, 2024, had an undrawn balance of Sh16.01 billion, about 84 percent of the donor funding.
There is also the Multinational Horn of Africa Isiolo-Mandera Corridor, El Wak - Rhamu Road, upgrading project that had drawn “only” Sh16.05 billion, representing 0.07 percent of the total commitment as at June 30, 2024 compared to 40 percent of the project period which had already elapsed.
Deputy President Kithure Kindiki inspects a section of Isiolo-Mandera road.
Photo credit: Photo | Pool
The Eastern Africa regional transport, trade and development facilitation project, IDA, was started on July 20, 2015 and was expected to end by December 29, 2024.
As at June 30, 2024, Sh45.2 billion had been drawn from the donor commitment of Sh49.3 billion, leaving an undrawn balance of Sh4.1 billion.
“In accordance with Clause II (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 says.
The Mombasa gate bridge construction project I loan agreement was to be implemented within seven years from December 5, 2019 with the targeted completion date of June 30, 2027.
The donor according to the Auditor-General’s documents, made a commitment Sh49.05 billion but as at June 30, 2024, with over four years of the project duration, lapsed, “only” Sh938.2 million, which is about 2 percent, had been drawn with Sh48.11 billion, which is 98 percent of the donor commitment undrawn.
