Donor projects stall as Kenya pays Sh6.5 billion on unused loans
Gathungu also warned that some projects carry clauses that require Kenya to pay commitment fees on undrawn loans, leading to further financial losses.
Kenya’s development spending has hit its lowest absorption rate in five years, with billions of shillings in allocated funds left unused, raising questions about government planning and project execution.
Auditor General Nancy Gathungu revealed that in the 2023/24 financial year, only Sh500.2 billion was spent on development out of a budgeted Sh708.8 billion.
This left Sh208.6 billion unutilised, representing a 29 per cent shortfall.
The Auditor General noted that the trend reflects weak expenditure management and poor project planning, which has also affected donor-funded initiatives.
“In addition, the audits of donor- funded projects indicate that the projects continue to experience low absorption of funds. For instance, in the financial year 2023/2024, fourteen (14) projects which had total project allocations of Sh515.1 billion had not utilised Sh304.4 billion or 59.1 per cent of the total allocation,” Gathungu said.
The under-absorption of funds has been worsening over recent years. In 2019/20, unutilised allocations stood at Sh71.2 billion (10 per cent), followed by Sh61.5 billion (nine per cent) in 2020/21.
The figure rose sharply to Sh171 billion (25 per cent) in 2021/22 and Sh127.8 billion (22 per cent) in 2022/23.
Gathungu also warned that some projects carry clauses that require Kenya to pay commitment fees on undrawn loans, leading to further financial losses.
“Indeed, between the fiscal year 2020/2021 and 2023/2024, the government paid commitment fees totalling Sh6.569 billion on undrawn amounts in respect of loans signed between the government of Kenya and foreign lenders,” she said.
A commitment fee is a payment made to lenders for keeping credit available, regardless of whether it is drawn.
According to the Auditor General, several key projects have been hit by low budget absorption.
These include the East Africa Skills Transformation and Regional Integration Project, which was approved in 2018 with World Bank funding of over Sh1 billion.
By June 30, 2024, the project had only drawn Sh526 million, leaving an undrawn balance of Sh137 million with one year remaining before its closure.
The Kapchorwa-Suam-Kitale and Eldoret Bypass roads project has also been affected, with an undrawn balance of Sh8.2 billion, equivalent to 35 per cent of the expected total funding as of September 30, 2023.
The Auditor General’s findings highlight a deepening challenge in the government’s ability to fully utilise resources set aside for development, raising concerns about wastage, stalled projects, and the burden of fees paid on unused loans.
