Treasury Warns 234 Donor-Funded Projects Could Stall, Exposing Taxpayers to Ksh130 Billion Cost
Treasury Cabinet Secretary John Mbadi said the review aims to identify projects that offer limited value to the country while placing heavy financial obligations on the government through required counterpart funding. The audit covers hundreds of ongoing and planned initiatives financed through a mix of foreign loans and grants.
According to the Treasury, many donor-funded projects have been structured around the commercial interests of foreign suppliers rather than Kenya’s actual development priorities. This approach, Mbadi said, has resulted in projects that are difficult to sustain and costly for the government to complete.
Hundreds of Projects at Risk
Treasury officials have identified 234 donor-funded projects that could stall or collapse altogether unless the government injects Ksh130 billion in counterpart funding. These projects collectively carry a total value of Ksh2.17 trillion, highlighting the scale of the potential exposure to public finances.
Mbadi described Kenya’s donor financing model as fundamentally flawed, arguing that it is often driven by suppliers seeking markets rather than by demand from local communities.
“Much of the donor funding coming into the country is supplier-driven, not demand-driven,” Mbadi said in an interview with Business Daily. “Some projects are initiated simply because a donor wants to put money into a particular area, not because it is a national priority.”
The Treasury has begun engaging development partners through the Office of the Deputy President while reviewing the entire pipeline of donor-funded projects to determine which ones should proceed, be redesigned, or discontinued.
Counterpart Funding Strains Public Resources
Under most donor financing arrangements, Kenya is required to provide counterpart funding before projects can move forward. Failure to do so often leads to delays, penalties, and additional costs, including high commitment and commission fees.
Treasury officials say these obligations place a significant burden on taxpayers, especially when projects stall due to delayed funding from the government’s side.
The concerns raised by the Treasury mirror findings by the Parliamentary Budget Office (PBO), which recently warned that the same 234 projects face collapse without the required counterpart funding. The PBO estimates that Ksh1.92 trillion of the total project value is financed through loans, while Ksh251 billion comes from grants—both of which still require local financial contributions.
Absorption Challenges and Delays
The PBO further cautioned that Kenya continues to struggle with low absorption of donor funds due to bureaucratic bottlenecks, limited institutional capacity, and delays in releasing counterpart funding.
“Kenya has previously experienced low absorption of donor funds due to bureaucratic hurdles and capacity constraints,” the PBO noted, warning that stalled or incomplete projects pose a serious risk to the country’s development agenda.
The budget watchdog added that mounting pending bills linked to donor-funded projects are likely to constrain domestically financed development spending, further straining public finances.
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