The value of government loans to State corporations rose by more than a fifth or Sh231.2 billion to hit Sh1.26 trillion in the year ended June 2024, amid the persistently slow pace of repayments that has led to write-offs running into billions of shillings.
Fresh data by the National Treasury shows the 22.4 percent rise in on-lent loans from Sh1.032 trillion came in the period when the parastatals only managed to repay Sh64.61 billion, leaving an outstanding balance of Sh1.197 trillion.
The Kenya Railways Corporation accounted for Sh737.5 billion or 61 percent of the outstanding loans, pointing to the impact of billions of shillings extended to it towards supporting the Standard Gauge Railway (SGR) project.
State-owned enterprises (SOEs) with high outstanding loans from the State include Kenya Airways (KQ) (Sh99.92 billion), Kenya Electricity Generating Company (Sh78.62 billion), Kenya Power (Sh71.32 billion), Athi Water Works Development Agency (Sh55.1 billion) and Coast Water Works Development Agency (Sh20.61 billion).
The surge in outstanding loans from Sh974.2 billion to Sh1.197 trillion came in the when period outstanding on-lent loan arrears, which include principal and accrued interest not paid, amounted to Sh266.5 billion.
Out of the arrears, Sh167.5 billion relates to Kenya Railways’ SGR loans which it is yet to start servicing. SOEs in the water sector were also singled out, having arrears of Sh34.1 billion. Additionally, the Treasury said Sh2.3 billion in loans in the sugar sector were written off.
“The water sector is facing challenges due to ongoing legal reforms given that water is a devolved function and some of the water companies owned by county governments are not remitting the funds to water agencies,” said Treasury.
Most of the SOEs had in the previous year applied for their loans to be written off because of financial constraints and inability to service the loans.
More than half (31) of the 54 State corporations did not make any repayments in the financial year ended June 2024, highlighting the continued struggles these entities are having in keeping up with loan repayments. For instance, during the review period, the State serviced a guaranteed debt of Sh17.4 billion on behalf of Kenya Airways, an indication that the State’s exposure is beyond the risk of losing the on-lent loans.
The payment of the KQ loan saw the stock of government-guaranteed debt as of the end of June this year drop to Sh100.2 billion from Sh170.2 billion. The State has also provided a guarantee to loans secured by KenGen and Kenya Ports Authority.
Firms such as Kenya Power and KQ are considered strategic and of national interest due to the overall impact their failure would have on the economy. Kenya has 248 State Corporations, out of which 46 are commercial enterprises, and 201 are non-commercial entities.
The Treasury says this obligates the State to bail them out from financial distress, despite the competing budgetary needs. A high number of commercial State corporations are concentrated in the transport and energy sectors, performing strategic functions.
