Taxpayers burden of 31-year-old Umoja Estate loan ends
City Hall borrowed Sh212 million from USAid in 1985. PHOTO | FILE
A 31-year-old City Hall loan used to build Umoja Estate has finally been cleared, easing the pressure on taxpayers who have been repaying the debt over the last four years.
The Treasury, which has been repaying the loan for years after City Hall defaulted, has not factored in any money to service the debt, an indicator that the amount has been cleared.
City Hall borrowed Sh212 million from USAid in 1985 to be paid at an interest of 8.5 per cent per year, with the Treasury as the guarantor.
The loan was to be repaid by 2014 but City Hall defaulted, leaving the Treasury to pay nearly Sh2.5 billion as interest and principal amount.
The City Hall loan has been a constant feature in Treasury’s debt repayment figures alongside Kenya Broadcasting Corporation (KBC) and Tana and Athi River Development Authority (TARDA) with the three having defaulted and the State stepping in as the guarantor.
It now remains to be seen if Treasury will heed the Controller of Budget’s (CoB) call to recover the amounts spent from the two parastatals and City Hall.
“The National Treasury should ensure that measures are put in place to recover the payments made on behalf of these institutions since they are going concerns,” CoB Agnes Odhiambo said last year.
If Treasury goes ahead to demand a refund of the amount, City Hall will have to pay hundreds of millions of shillings to the national government.
A move to recover the amount from Nairobi County would add to City Hall’s woes with the county government suffering cash flow problems and a mounting debt which has risen to Sh48.9 billion.
“The debt trend has been increasing from the year 2014 to 2016 from Sh36 billion in 2014 to Sh48 billion in 2016. This indicates a 32.9 per cent increase in debt,” the County Budget Review and Outlook Paper says. Treasury’s quarterly economic budget review for the three months to September (quarter one) however shows that Treasury is still repaying the Tarda and KBC loans.
Sh163 million was spent in repaying the KBC loan with repayment for the Tarda loan to begin in quarter two.
The public broadcaster inked the 16 billion Japanese yen loan agreement in 1989 with Japanese Agency for International Development (JICA) to spread its reach across the country through the medium wave (MW) radio broadcast network, with the promoters hoping the expansion would grow advertising revenues.
But the proliferation of FM stations from the mid 1990’s and mismanagement has seen KCB lose market share.
The yen has strengthened against the Kenya Shilling over the past two decades, making the loan unbearable to KBC.
The State also stepped in to aid Tarda — now under the rural development department — which has also failed to repay money it borrowed from JICA.
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