The Kenyan government is paying KSh 89 million every year in commitment fees for a COVID-19 loan that remains unused. This loan, obtained from international lenders to help the country manage the pandemic, has not been accessed due to delays in project implementation.
According to the latest report from the National Treasury, Kenya is incurring these costs as part of the agreement with lenders, which requires payment even if the funds are not drawn. The loan was secured from the African Development Bank (AfDB) and the World Bank during the height of the pandemic to support healthcare and economic recovery. However, several factors, including bureaucratic processes and project delays, have prevented the disbursement of the funds.
Economists and financial experts have raised concerns over the rising cost of idle loans. Policy analyst James Muigai stated that paying millions for funds that are not being utilized is a sign of poor planning. “Kenya is already struggling with high debt repayments, and adding unnecessary expenses only worsens the situation,” he said.
The commitment fee is a charge imposed by lenders on undisbursed loan amounts as a way to ensure that borrowers do not hold funds without using them. In Kenya’s case, the KSh 89 million payment is expected to continue until the government fully accesses the loan or cancels it.
Treasury officials explained that the delay in using the loan is due to challenges in project approval and implementation. Some of the funds were meant to be used for expanding healthcare facilities, purchasing medical equipment, and supporting businesses affected by the pandemic. However, slow decision-making and difficulties in meeting loan conditions have resulted in the funds remaining untouched.
Despite the payments, Kenya’s overall public debt continues to rise. As of December 2024, the country’s total debt stood at KSh 11.1 trillion, with external loans making up a significant portion. The government has been under pressure to manage its debt levels, especially as repayment obligations continue to grow.
Opposition leaders and civil society organizations have criticized the government for failing to use the loan effectively. Senator Edwin Sifuna questioned why the funds were still idle when the healthcare sector and small businesses continue to struggle. “We have hospitals lacking equipment and businesses shutting down, yet we are paying for a loan that we have not even used,” he said.
Meanwhile, the Treasury has assured the public that it is working on resolving the delays. A senior official, who requested anonymity, revealed that discussions are ongoing to ensure the funds are accessed soon. “We recognize the concern, and we are working with relevant agencies to ensure these funds are put to good use,” the official stated.
As Kenya continues to face economic challenges, experts warn that the government must improve financial management to avoid further wastage of public funds. Many are urging policymakers to prioritize efficient use of borrowed money to prevent unnecessary costs that burden taxpayers.
