Kenya has incurred nearly Sh8 billion in commitment fees over five years on loans that remain undrawn, according to recent reports by Auditor General Nancy Gathungu and Controller of Budget Margaret Nyakang’o.
The fees relate to loans secured between the 2020/21 and 2024/25 financial years intended for various government projects but not yet accessed. These commitment fees are charges paid to lenders for keeping credit lines open, ensuring funds are available under agreed terms despite changes in financial markets.
Issues Highlighted in Reports
- The Auditor General noted that these fees reflect borrowing commitments made before projects were sufficiently prepared for implementation.
- The Public Debt and Privatisation Committee, led by MP Abdi Shurie, pointed out that the accumulation of such fees signals delays in project execution and slow fund disbursement.
- The Controller of Budget emphasized that these fees increase the overall cost of borrowing, especially amid high interest rates on government securities.
Under the Public Finance Management Act, the National Treasury is mandated to ensure transparent and effective management of public finances, including prudent borrowing practices.
The Parliamentary committee has urged the Treasury to enforce performance benchmarks to confirm project readiness before loan acquisition and to promptly cancel undisbursed loan tranches to avoid unnecessary fees.
Additional Financial Management Concerns
In the first half of the 2025/26 financial year, the Treasury conducted a liability management operation to buy back $628.4 million of a $1 billion Eurobond issued in 2018, at a cost of $657.9 million. This included a premium of $23.57 million and accrued interest, resulting in an additional expenditure of approximately Sh3.86 billion above the principal.
The Controller of Budget continues to call for enhanced parliamentary oversight over the entire public debt cycle to improve borrowing, utilisation, and repayment processes.
