Cabinet Secretary for the National Treasury and Economic Planning, John Mbadi has announced the government has secured a concessionary loan of Ksh36 billion with China.
While appearing before the Senate on Wednesday, October 2, Mbadi explained that the loan would be used to complete 15 roads that were under construction.
“We are on a program and a strategy to make sure that especially on the road sector that we bring back the road constructors on the road,” Mbadi explained.
“We managed to negotiate a concessionary loan of Ksh36 billion with China through the China Development Bank to take up about 15 roads,” Mbadi added.
Mbadi explains reason why the Government took a Chinese loan
The CS said that these roads were being constructed through the Government of Kenya funds but were awarded to Chinese contractors.
He added that the Government has changed the responsibility from paying the contractors through GoK funds to paying them through the concessionary loan.
“If these contractors come back to work, it will increase the contribution of the construction sector to our Gross Domestic Product,” he added.
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At the same time, Mbadi revealed why government road projects have stalled.
He explained that the government’s large debt to contractors has forced it to abandon road projects.
“At least we know that we owe cumulatively about Ksh 167 billion to the various road contractors and that is why you see across the country all road projects have stalled,” Mbadi explained.
Treasury CS explains why government road projects stalled
The Treasury CS explained that the large debt resulted from contractors imposing significant interest and penalties, contributing to the overall financial burden.
“Quite a significant portion of this is due to the interest and penalties charged by these contractors,” Mbadi explained.
He further claimed that some contractors deceived the government by supplying substandard materials at inflated prices.
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He added that these contractors often charged interest and penalties for idle equipment, even when they brought broken machinery and left it on-site.
Mbadi was optimistic that the government would have cleared the debts by the end of December 2024.
“We hope by the end of December 2024 we should be able to have cleared at least the pending bills to the road contractors and have the contactors back on the road,” Mbadi explained.
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