Trea­sury bor­rows Sh32bn for arms

Business Daily (Kenya) - - FRONT PAGE - Ed­win Mu­tai emu­[email protected]­tion­media.com Henry Rotich.

Kenya bor­rowed more than Sh30 bil­lion to buy weapons which con­trib­uted to a Sh270 bil­lion build-up in the coun­try’s for­eign debt load in the four months to Fe­bru­ary.

A fresh re­port tabled in Par­lia­ment last week shows the ad­di­tional loans were spent on pur­chase of mil­i­tary jets, ex­pan­sion of the naval base, build­ing of a sec­ond in­ter­na­tional run­way as well as pur­chase of CT scans for the coun­try’s health sec­tor.

The new loans have pushed up Kenya’s to­tal ex­ter­nal debt to Sh2.52 tril­lion.

Kenya’s pub­lic debt re­cently crossed the Sh5 tril­lion mark for the first time, point­ing to a loom­ing in­crease in debt ser­vic­ing obli­ga­tions, in­clud­ing in­ter­est and prin­ci­pal re­pay­ments.

The ul­ti­mate im­pact of the bor­row­ing binge is an in­crease in re­cur­rent ex­pen­di­ture and a squeeze on de­vel­op­ment spend­ing.

The Ju­bilee govern­ment has many times de­fended sign­ing of new loans, say­ing they were for fi­nanc­ing eco­nom­i­cally pro­duc­tive in­fra­struc­ture projects.

Weapons could act as an im­por­tant de­ter­rent from for­eign ag­gres­sion which guar­an­tees long-term eco­nomic growth, but they do not di­rectly con­trib­ute to in­creased tax col­lec­tions needed for re­pay­ing the ex­pen­sive debts.

The Trea­sury says it signed a Sh203.2 bil­lion in­ter­na­tional sov­er­eign bond and nine new loans worth Sh67.4 bil­lion be­tween Novem­ber 1, 2017 and Fe­bru­ary 28, 2018.

Trea­sury data sub­mit­ted to Par­lia­ment shows that pro­ceeds of the Sh203.2 bil­lion in­ter­na­tional sov­er­eign bond has been re­ceived by

Kenya. “Dis­burse­ments from the loans are ex­pected over the medium term. None of the loans have been dis­bursed; how­ever the in­ter­na­tional sov­er­eign bond is fully dis­bursed. This brings the to­tal ex­ter­nal debt dis­bursed to Sh2,524,530,791,430,” Henry Rotich, the Trea­sury sec­re­tary, says in a re­port to Par­lia­ment de­tail­ing all new loans con­tracted by the govern­ment of Kenya.

Top­ping the list of the nine loans is the pur­chase of a C-27J Spar­tan mil­i­tary air­craft at a whop­ping Sh20 bil­lion ($198,448,276). The C-27J Spar­tan is man­u­fac­tured in Italy. The Kenyan govern­ment signed the loan with Unit­credit Spa Bank on De­cem­ber 11, 2017 and it ma­tures on June 11, 2029.

On the same day, the Trea­sury bor­rowed a fur­ther Sh6 bil­lion (euro 51,854,681) from Unit­credit Spa Bank to pur­chase an undis­closed num­ber of he­li­copters (AW 139 he­li­copters). The two (C-27J Spar­tan air­craft and he­li­copters) loans will be re­paid start­ing June 11, 2019. The coun­try also took in two sep­a­rate loans on the same day worth Sh5.4 bil­lion (euro 45,917,680) and Sh1 bil­lion (euro 8,783,120) for com­mis­sion­ing of Da­men 4000 tonne Slip­way at the Kenya Navy Naval Base in Mtongwe, Mom­basa. The deal for the loans from ING Bank was sealed on De­cem­ber 4,2017 with a ma­tu­rity date of June 2030. “The loan was ad­vanced to help im­prove se­cu­rity sur­veil­lance along the Kenyan coast.”

The coun­try also in­curred a debt of Sh16 bil­lion ($160 mil­lion) that the govern­ment bor­rowed from African De­vel­op­ment Bank to con­struct a sec­ond run­way at the Jomo Keny­atta In­ter­na­tional Air­port (JKIA). The loan was inked on Jan­uary 1, 2018 and ma­tures on Fe­bru­ary, 2026. “The loans per­ceived ben­e­fit is im­proved move­ment to en­able Kenya meet grow­ing de­mand of goods and spur eco­nomic growth,” Mr Rotich said. The Trea­sury signed an­other loan of Sh6.8 bil­lion ($67.3 mil­lion) from China De­vel­op­ment Bank for pro­cure­ment of the con­tro­ver­sial CT scans for 37 pub­lic hos­pi­tals. The deal was inked on De­cem­ber 11, 2017 and ma­tures in Oc­to­ber 2022. Kenya con­tracted a Sh9.6 bil­lion ($94,697,000) loan from Korea’s Ex­port De­vel­op­ment Co­op­er­a­tion Fund that is ear­marked for es­tab­lish­ment of Kenya Ad­vanced In­sti­tute of Science Tech­nol­ogy. The loan will be re­paid in 60 equal in­stal­ments of $1.57 mil­lion start­ing Au­gust 20, 2017.

The Trea­sury also signed a Sh748 mil­lion ($6.4 mil­lion) for sup­ply of med­i­cal equip­ment across the coun­try and Sh584.5 mil­lion ($5 mil­lion) to up­grade the ma­ter­nal and new­born care unit at Kapen­guria District Hos­pi­tal.

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PUB­LIC DEBT Trea­sury CS

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