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State sinks Sh468bn loans into regular uses in breach
The government used only Sh350.7 billion out of the Sh818.3 billion it borrowed in the year to June 2024 on development activities.
The government used only Sh350.7 billion out of the Sh818.3 billion it borrowed in the year to June 2024 on development activities, breaching a legal requirement that all borrowed funds be used on projects.
This means that more than half (57 percent) of the borrowings were used to fund recurrent activities such as salaries and allowances in breach of the Public Finance Management (PFM) Act 2012.
The revelation also highlights the cash flow pressures the government operated under in the days leading to 2024 tax proposals that caused countrywide protests last year.
In the 2025 Budget Policy Statement (BPS), the Treasury made the revelation that less than half of borrowings went into funding development activities during the year to June 2024.
“In the financial year 2023/24, Sh350.7 billion out of total borrowing of Sh818.3 billion were used for development expenditure purposes,” Treasury notes in the BPS.
Spending borrowed funds on non-development activities breaches section 15(2) of the PFM Act.
While addressing salary delays for public servants and delays to send money to counties in April 2023, the President was categorical that the government would not resort to using borrowed funds to fund recurrent activities, a promise he appears to have since reneged on.
“We are not going to borrow money to pay salaries,” the President said amid pressure that followed salary delays and fears of disruption of services at the time.
While the portion of borrowing the Treasury says was used to fund development (Sh350.7 billion) remains the same as the figure it disclosed in the 2024 budget review and outlook paper (Brop), the amount used to fund recurrent activities has gone upwards by Sh52 billion.
In the 2024 Brop, Treasury indicated that the government had used Sh415.7 billion of the borrowings in 2023/24 fiscal year to fund recurrent activities, which has now gone up to Sh467.6 billion.
This was after the Treasury disclosed in the 2025 BPS that total borrowings in the 2023/24 fiscal year amounted to Sh818.3 billion, as opposed to the figure of Sh766.4 billion that it had referred to as total borrowings in the Brop.
Treasury, however, maintains that it will adhere to legal requirements to only use government borrowings to finance development expenditure.
“The Government is committed and continues to adhere to this principle by ensuring that Government borrowing is used to finance development expenditure,” it says.