Home BUSINESS NEWS Taxpayers to shoulder burden of repaying parastatals’ loans

Taxpayers to shoulder burden of repaying parastatals’ loans

by biasharadigest

Times Tower building in Nairobi, CBD. [Courtesy]

The National Government will have to spend more money to bail out parastatals as they continue to default on loans they have taken.

Data from the National Treasury shows that the bulk of State corporations continue to default on loans advanced to them, with only a handful servicing the same.

Power, energy and water corporations lead State agencies with huge unpaid loans, with the national carrier following closely in the list of debtors.

KenGen, which leads the pack, is currently servicing a Sh115 billion loan followed by Kenya Power, which has a loan of Sh75 billion as of last year June.

Interestingly, the two companies also lead in paying back the loans taken.

KenGen had a loan of Sh138 billion while KP had taken a Sh86 billion loan and by June last year they had paid Sh23 and Sh10 billion, respectively.

“Total outstanding loans by the National Government to State corporations, government agencies, and other organisations as at June 30, 2020 stood at Sh867 billion,” reads the report in part.

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In January, the Central Bank of Kenya issued a warning to commercial banks that they risk losing their money if they lend to State agencies.

CBK warned that reduced economic activities, stiff competition and poor governance among the parastatals would expedite the possibility of defaulting.

By 2019, a total of 35 banks had issued loans to parastatals, with those in the energy sector accounting for the biggest share.

According to the latest report by the Treasury, some 29 State agencies did not service their loans, filing zero by the end of June last year.

Leading the pack of defaulters was Coast Water Service Board, which is owed Sh26 billion but did not pay a cent by last year to service its loan.

According to a Treasury report, more than half of the country’s 247 parastatals registered either a deficit or a loss in the 2020 financial year.  

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