A parliamentary inquiry has exposed deep gaps in the government’s loan management system, showing that state agencies received billions of shillings in borrowed funds without proper scrutiny, leaving the public to shoulder a debt of more than Sh153.8 billion.
The findings show that most of the loans extended to state corporations remain unpaid, with the interest and penalties now surpassing the principal amount.
The Auditor-General’s report, submitted to the National Assembly Committee on Public Debt and Privatisation, revealed that several loans were issued without involving the Department of Government Investment and Public Enterprises, which is mandated to participate in the lending process.
The audit further highlighted that most loan beneficiaries lacked the financial strength to meet repayment terms yet still received government credit.
Covering the 2018-19 to 2023-24 financial period, the report reviewed lending in key areas such as water, transport, energy, agriculture, health and finance. By June 2024, the government had disbursed Sh153.79 billion in on-lent loans, but only Sh1.6 billion—slightly above 1 per cent—had been paid back, forcing the Treasury to settle the obligations on behalf of the agencies.
The delayed payments have pushed the government to cut spending and rely on fresh borrowing to meet debt obligations.
“The failure to assess the creditworthiness of SOEs and poor monitoring of projects funded through on-lent loans have exposed taxpayers to enormous financial risks,” said Deputy Auditor-General Isaac Ng’ang’a, noting that some of the loans have accumulated interest over several years without any effort from the benefiting entities to repay.
Water bodies accounted for the largest share of issued loans, with 58 out of 95 recorded by mid-2024. Kenya Railways, which received nearly 59 per cent of the funds examined, was also cited for stalled initiatives and repayment gaps.
In one case, the Athi Water Works Development Agency owed more than Sh1 billion tied to a halted Nairobi water distribution project, a trend mirrored in other water service providers and transport sector agencies.
“And I think the deputy auditor general has mentioned that that is where we also realised a number of issues, one of them relating to money that is remitted from the Water service providers, but it is not submitted to the National Treasury,” Bringo North MP Joseph Makilap told the committee.
Nyaribari Masaba MP Daniel Manduku called for a detailed reconciliation of borrowed amounts, repayments and incomplete works. “When interest and fines exceed the principal, it tells you something is fundamentally wrong,” he said.
Director of Audit Gideon Mokaya warned that continued non-payment has limited government spending space and increased reliance on debt. He told lawmakers the review sought to evaluate how the loans were managed and whether any recovery steps were taken.
The committee resolved to summon officials from the National Treasury and the institutions under review to explain the gaps and outline recovery plans.
