A special audit on external debt servicing between 2018–19 and 2021–22 fiscal years reveals that the government could have avoided Ksh 55.8 billion in loan penalties had it addressed bureaucratic inefficiencies and adhered to borrowing regulations.
The Treasury spent Sh100 billion on servicing 90 loans, of which Ksh 55.8 billion went toward commitment fees for delays in loan drawdowns and debt settlements, frequently even after project completion.
Despite the completion of 17 projects, primarily in the energy sector, by June 2022, Ksh 69 billion remained in loan accounts, accruing unnecessary fees.
The audit shows that the Treasury missed payment dates for 61 out of 90 Payment Advices (PAs), including delays of 15 to 330 days for 11 payments totaling Ksh 904.4 million and premature payments for 50 loans worth Ksh 45 billion by three to 14 days.
Auditor-General Nancy Gathungu says there is a lack of transparency and clarity in the debt servicing process, which involves the Treasury, Controller of Budget (CoB), and Central Bank of Kenya (CBK).
She notes that these operational clashes could lead to fraud risks and increased borrowing costs.
The Treasury cited delays in issuing legal opinions, tracing transaction files, and protracted Debt Service Suspension Initiatives (DSSI) negotiations as reasons for these lapses.