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Audit Reveals How Treasury Wasted Ksh 55.8 Billion in Avoidable Debt Servicing Penalties A special audit on external debt servicing between 2018-19 and 2021-22 fiscal years reveals that the government could have avoided Ksh 55.8 billion in loan penalties had it addressed bureaucratic inefficiencies and adhered to borrowing regulations. Out of Sh100 billion spent by the Treasury on servicing 90 loans, Ksh 55.8 billion was due to commitment fees for delays in loan drawdowns and debt settlements, often even after project completion. By June 2022, although 17 projects (mainly in the energy sector) were completed, Ksh 69 billion remained in loan accounts accumulating unnecessary fees. The audit shows that the Treasury missed payment dates for 61 out of 90 Payment Advices (PAs), including delays of 15 to 330 days for 11 payments totalling Ksh 904.4 million and premature payments for 50 loans worth Ksh 45 billion by three to 14 days. Auditor-General Nancy Gathungu says there is a lack of transparency and clarity in the debt servicing process, which involves the Treasury, Controller of Budget (CoB) and Central Bank of Kenya (CBK). She notes that these operational clashes could lead to fraud risks and increased borrowing costs. Delays in issuing legal opinions, tracing transaction files and protracted Debt Service Suspension Initiatives (DSSI) negotiations were cited by the Treasury as reasons for these lapses.