Yatani gets Sh78b in extra cash

Kenya’s bilateral partners agreed to defer loan repayment worth Sh77.8 billion, giving the country a much-needed breather at a time when its finances are in bad shape.

The payment break has helped the Government to increase its spending for the current financial year by Sh75.1 billion through a supplementary budget to be tabled before parliament for approval. A big chunk of the money will go into the construction of roads and to stimulate the economy.

China, Kenya’s largest bilateral lender, gave Kenya a debt repayment holiday of Sh30 billion, including the first payment for the second phase of the Standard Gauge Railway (SGR) from Nairobi to Naivasha, according to a mini-budget that was prepared by the National Treasury.

The differed payments will leave the Government with an extra cash of Sh41.9 billion saved from the principle loan and Sh35.9 billion from interest payments.

Kenya also received a debt repayment moratorium from some 10 Paris Club member countries that will defer payment for Sh32.9 billion that were due to these lenders between January and June this year.

All the savings that Kenya made from China were sourced from the Exim Bank of China. China Development Bank, also a key lender, however, stayed away from the Debt Service Suspension Initiative (DSSI) that is being done under the G-20 framework.

The other major savings came from a creditor that was only referred to as ‘New Loans’ from which the country deferred payment of interest worth Sh26.1 billion.

Other countries that have extended debt repayment to Kenya include Italy which has rescheduled loans amounting to Sh6.9 billion, France (Sh4.3 billion), Spain (Sh3.2 billion), Japan (Sh2.1 billion), and Germany (Sh1.4 billion).

Getting a debt repayment holiday helped the National Treasury to meet certain critical finance obligations, including disbursement of funds to the 47 counties.

Disbursement of funds to counties was delayed by two months, with the county chiefs threatening legal action for the Sh97 billion that had not been remitted.

Moreover, the Government has had difficulty paying healthcare workers at a time when the country has been grappling with the Covid-19 pandemic which has almost threatened to overwhelm the healthcare system.

In the Draft Budget Policy Statement for 2021-22, the Cabinet Secretary for National Treasury Ukur Yatani said the budget has been done at a time when the prevailing unfavourable macroeconomic conditions have adversely affected revenue performance.

“Thus, we have had to critically review our existing programmes and policies to ensure that they are not only consistent with our development agenda but is also informed by emerging realities brought about by the emergence of Covid-19 Pandemic,” said Yatani.

China was the last country to give Kenya a debt repayment holiday, after a long period in which the world’s second-largest economy had dithered in participating in the DSSI programme.

Experts say failure by the China Development Bank to participate from the DSSI was due to its classification as a commercial bank. Treasury increased the budget for the current year by Sh124 billion with cash-strapped Kenya Airways among the beneficiaries in the new budget.

The first supplementary budget for the current financial year will be tabled in Parliament for approval.

The budget for the roads department increased by Sh38 billion, as the Government moves to complete most of the roads around the country to stimulate the economy in the process.