Kenya signs Sh520bn loans and grants deal with European Union

Kenya has signed a five-year €4.5 billion (Sh520 billion) loans and grants deal with the European Union (EU), adding to the country’s debt load that now stands at Sh5.146 trillion.

The amount, contained in EU’s 2018 to 2022 joint co-operation strategy, is an increase from the previous five-year deal of €3 billion (Sh346 billion) and will focus on President Uhuru Kenyatta’s Big Four agenda.

“This agreement not only harmonises investment over a long period of time, it also aligns financial support with the priorities and objectives of the national government, such as the Government of Kenya's Medium Term Plan III and the Big Four agenda,” the EU said Monday.

The agreement was signed between Treasury Cabinet secretary Henry Rotich and EU ambassador to Kenya Stefano Dejak.

Mr Rotich did not, however, disclose which proportion of the amount is loans and which one is grants.

The 19-member country bloc said it would to use the money to support Kenya's lower middle-income status while addressing inequalities and challenges that persist across the country. Focus areas will be infrastructure, job creation, resilience building accountability and governance.

Mr Rotich, said the money would also help the country in addressing the flooding menace as well as drought management through irrigation.

“The support we have received will help the country in improving its economy. As you know, the country has many infrastructure deficit projects,” he said.

The €4.5 billion includes indicative financial commitments of the EU (€505.4 million), the European Investment Bank (€500.75 million), Denmark (€151 million), France (€1.412 billion) and Finland (€33.7 million).

Policy dialogue

Others will be Germany (€638 million), Italy (€144.4 million), Ireland (€5.5 million), Slovak Republic (€2.5 million), Sweden (€114.8 million), Netherlands (€216.3 million) and the United Kingdom with €554 million.

Austria, Belgium, the Czech Republic, Greece, Hungary, Poland, Portugal, Romania and Spain do not have active co-operation portfolios but will engage with Kenya on other levels such as political and policy dialogue of the EU.

The previous agreement that ran from 2013 to 2017 centred on medium term plan II with attention on areas such as energy and transport, agriculture and rural development. Lake Turkana wind power project also benefited from this fund.

President Kenyatta recently reiterated that his government would not stop borrowing for as long as the debt is towards development agenda and is not wasted through corruption.

“If I don’t borrow, where will the roads come from? It is a must to borrow to ensure that the needs of the people are met but let’s ensure that the money is spent prudently (sic),” he said last week in Kitui.

Kenya’s draft Budget Review and Outlook Paper show that total debt will jump to nearly Sh7.17 trillion in the year ending June 2022, being the year President Uhuru is expected to leave office.