The National Treasury is considering cancellation of loans that were meant to finance projects which have since stalled.
In a new proposal, the ministry said it will regularly review the projects that different government agencies will be undertaking and, where necessary, terminate them and the loans financing them to give the country some reprieve.
There were 545 stalled projects valued at Sh366 billion as at June last year, according to a report by the Parliamentary Budget Office.
“Loan facilities of non-performing projects will be reviewed accordingly on a regular basis to allow modification of project implementation or loan cancellation if necessary, as well as to revise the level of new borrowings to be approved in subsequent periods,” said Treasury in the proposed Debt Policy and Borrowing Framework that is set to undergo public scrutiny.
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The framework also makes an attempt to lock out wheeler-dealers by requiring project proposals to be forwarded to Treasury by the ministries where such projects will be housed.
There are numerous instances where politically-connected contractors have been paid huge sums of money but left the country with poorly thought-out projects that do not meet public needs.
“All project proposals should be forwarded to National Treasury through the line ministries and not through financiers and or contractors. The Public Debt Management Office will review all documents and independently assess the cost and benefits analyses submitted and evaluate the sources of financing,” reads the framework.
Kenya’s public debt hit Sh6 trillion in August even as Treasury sought approval for a Sh9 trillion ceiling, doing away with the previous limit set at 50 per cent of the gross domestic product (GDP).
At the current levels, the share of debt to GDP stands at 63 per cent, assuming a GDP of Sh9.5 trillion.
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The government will also restrict the use of commercial loans to profit-making ventures or projects of strategic value, while social projects will be financed through concessional loans.