Kenya is paying fees on billions of shillings in external loans that remain unused, with the Controller of Budget warning that delays in project preparation are exposing taxpayers to unnecessary borrowing costs.
Controller of Budget Margaret Nyakang’o raised the concern in a report submitted to the National Assembly Public Debt and Privatisation Committee, which is examining commitment fees incurred between the 2015/16 and 2025/26 financial years.
The committee has asked the Office of the Controller of Budget to review the fees paid, the undrawn loan balances, projects involved and government agencies linked to the charges.
Nyakang’o said the continued payment of commitment fees points to weaknesses in the preparation and management of externally funded projects, particularly where loans are secured before implementing agencies are ready to use the money.
“Commitment fee is the fee we pay for the undisbursed borrowed loans,” Nyakang’o has previously told the committee.
She warned that delays can leave the country paying both commitment fees and interest on money that has not yet been put to work.
“Last time we looked at project readiness and we realized that we sign loans when project implementors are not ready and we end up paying Commitment fees and loan interests, which is a double loss, and we need to put our acts together,” she said.
The latest report identifies several factors behind the continued accumulation of commitment fees, including undisbursed loan balances, delays in project implementation, weak planning and procurement processes, fiscal constraints and operational challenges.
Nyakang’o told the committee that Kenya’s Public and Publicly Guaranteed Debt Stock stood at Sh13.010 trillion as of June 30, 2026, representing a 10.3 per cent increase from Sh11.799 trillion recorded a year earlier.
External debt accounted for Sh5.685 trillion of the total. Multilateral lenders accounted for 54.6 per cent of external debt, commercial creditors 27.1 per cent and bilateral lenders 17.1 per cent.
During the 2025/26 financial year, Sh764.80 billion was disbursed from external loans, while Sh1.277 trillion remained undisbursed.
The Controller of Budget has also raised concerns about coordination between the National Treasury and ministries, departments and agencies responsible for implementing projects funded through external borrowing.
Nyakang’o has previously warned that some loans are negotiated and signed before implementing agencies have completed the necessary preparations.
“This is a debt trap we are being forced into. We are borrowing for loans that we are not ready to utilise,” she said.
She said paying fees and interest on funds that have not been used for development effectively takes away resources that could have supported other government priorities.
The Controller of Budget cited the Kenya Technopolis project and an underground power cabling project in Nairobi among cases where concerns emerged over project readiness and coordination between government agencies.
The report calls for better preparation before loan agreements are signed, including completion of project designs, procurement arrangements and the establishment of institutional capacity needed to begin implementation.
Nyakang’o urged the government to strengthen planning, procurement and implementation systems so that external financing is deployed promptly and delivers the intended development benefits.
The concerns come as the government continues to seek external financing to support its budget plans, increasing the importance of ensuring that borrowed funds are linked to projects ready for implementation.
“Commitment fees are not just an avoidable cost but should now be viewed as a symptom of inefficiencies that need to be addressed,” Nyakang’o told the committee.
The Public Debt and Privatisation Committee is expected to scrutinise the report and establish the projects and government agencies responsible for the undrawn balances and related commitment fees.