The government has repaid slightly more than half of the debt guaranteed to State-owned enterprises for the first quarter of the fiscal year 2019/20.
According to the Controller of Budget (COB), the State paid Sh330 million out of the total of Sh617 million allocated for the the fiscal year, an indication of the extent to which the entities continue to weigh on the Budget.
Companies for whom the national government makes the repayments have for years included East African Portland Cement Company (EAPCC), the Kenya Broadcasting Corporation and the Tana River Development Authority (Tarda).
But in the latest budget review, KBC is excluded.
From COB’s report, the first quarter of the fiscal year shows the allocation to the parastatal loans was under salaries, allowances and miscellaneous services vote.
“In FY 2019/20, salaries, allowances and other services was allocated …Sh617 million towards guaranteed debt to State parastatals…exchequer issues amounted to Sh330 million towards [repayment of] guaranteed loans to State parastatals,” said the COB. The loans were incurred at a time the companies were struggling, but they have since found it difficult to repay.
The publicly guaranteed loans and advances constitute one of the contingent liabilities of the State and which have contributed to the realised risks from unregulated borrowing by parastatals over the years.
The Treasury has, however, since incurring of the liabilities been attempting to limit these types of loans. It has annually been issuing circulars to the entities to submit their financial plans, including projects to control borrowing.