Kenya: Covid-19 - How Govt Took U.S.$42 Million Loan Every Day

Health workers take samples for Covid-19 tests from hotel workers in Nyeri town (file photo).
9 September 2020

Kenya borrowed Sh4.5 billion every 24 hours in the first three months of the Covid-19 pandemic, in a debt accumulation spree rarely witnessed in any East African country.

Backed by modelling simulations by Health ministry experts, who projected millions of corona infections, Kenya went all out to secure a financial war chest.

With a worst-case scenario of hundreds of thousands dead and millions infected by the end of the year, the National Treasury kept its foot firmly on the borrowing gas pedal -- signing up for billions from global lenders, including the World Bank.

Then, with the Health ministry as referee, the spending started, with counties awash with Covid-19 emergency funds.

But with the curve flattening way earlier than predicted at levels far lower than had been projected, the country is now emerging on the other end of the coronavirus crisis, counting the cost of the pandemic with a mountain of debt and millions of job losses.

Global lockdowns

The total public debt stood at Sh6.2 trillion at the time the virus landed in Nairobi in March. This comprised Sh3 trillion of domestic debt, while the remaining Sh3.2 trillion was external debt, according to data from the Central Bank of Kenya (CBK).

In just three months to June, the public debt had ballooned by Sh410 billion to Sh6.6 trillion, in one of the fastest accumulation of public debt by the Jubilee administration. This translates to about Sh136 billion a month or Sh4.5 billion a day.

Despite global lockdowns, the country borrowed Sh303 billion from the international markets and the remaining Sh107 billion locally.

Between June and August, another Sh200 billion was borrowed locally. Official external borrowing figures are yet to be updated to August, but at this rate, the country is now close to Sh7 trillion deep in debt.

To put this number into perspective, in the previous quarter before Covid-19, Treasury had adopted a more conservative stance on public expenditure and had started plucking the first fruits of austerity measures.

For instance, between December and the end of February, Kenya borrowed a total of Sh125.6 billion, which is about 41 billion a month. But in the Covid season, the speed of borrowing tripled or grew 3.3 times.

Cost of pandemic

As the dust settles and reality sinks in, the true cost of the pandemic will be measured by the number of Kenyans who have ended up on the streets jobless, as companies moved into self-preservation mode, through cash conservation, which may have resulted in unnecessary redundancies.

In March, the number of employed Kenyans aged 15 to 64 years, which is the economic productive age, stood at 17.5 million.

This number had dropped to 15.8 million by the end of June. This means that 1.7 million Kenyans have been rendered jobless, according to the latest data from the Kenya National Bureau of Statistics (KNBS).

"The unemployment rate, measured based on the strict definition, increased to 10.4 per cent in the second quarter of 2020, compared to 5.2 per cent recorded in the first quarter of 2020," the latest KNBS Quarterly Labour Force Report reads in part.


It says the highest proportion of the unemployed was recorded in the age groups 20-24 and 25-29, each registering over 20 per cent.

"The same age groups also had the highest increase of over 10 per cent each in unemployment over the three-month reference period."

The Parliamentary Budget Office (PBO), in its latest report, notes that "the pandemic has simply worsened an already existing dire situation and exposed the soft underbelly of the country's economic growth story."

But it is the miscalculations and theft of the borrowed funds that is set to haunt the country.

Four months in, and with a curve that is already flattening, the national medical supplies monopoly, Kenya Medical Supplies Authority, is stuck with expensive stock running into billions of shillings in personal protective equipment it cannot sell.

In the regions, counties hurriedly built isolation centres that are virtually empty and barley in use, as the debt office at the National Treasury starts calculating the interest repayments that the taxpayer will have to pay.

Isolation centres

Counties were mobilised and asked to beef up their healthcare systems, with each county required to have 300-bed capacity isolation centres, on top of buying ventilators, and increasing their ICU beds capacity.

In the last four months, the regions have received over Sh13 billion aimed at bolstering the level of readiness.

But now, with over 35 counties having reached the threshold of 300 beds, Covid-19 cases are falling with centres in some counties either empty, or barely half-full.

Last week, the Council of Governors status report on Covid-19 preparedness showed that 17 counties, which have quarantine facilities, don't have a single person in those centres.

"Out of 43 counties which had reported active quarantine, there were 859 patients in the facilities, with 976 who previously had been confined having been released," CoG Chairman Wycliffe Oparanya said three weeks ago.

This meant that with over 10,500 isolation beds available in the country, only under 1,800 had been used.

But even more telling was when Controller of Budget Margaret Nyakango, mid last week revealed that counties had only spent Sh3.43 billion of the Sh13.1 billion disbursed for the implementation of Covid-19 interventions since March.

This begs the question: Did the policymakers and Treasury mandarins over-budget for Covid-19? Did they overestimate the country's budget absorption capacity?

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