Treasury defies Controller of Budget on Nairobi bailout
Agnes Odhiambo, the Controller of Budget. PHOTO | FILE
What you need to know:
The Treasury has spent Sh181 million to pay international lenders for loans defaulted by the two institutions in the three months to September.
Controller of Budget Agnes Odhiambo wants the Treasury to recover all the money it has paid out on behalf of the agencies whose loans it guaranteed, but are not insolvent.
The Treasury has continued to spend hundreds of millions of taxpayers’ money to bail out City Hall and the Tana and Athi River Development Authority (Tarda) for defaulted loans despite advice against the payments from the Controller of Budget.
The Treasury has spent Sh181 million to pay international lenders for loans defaulted by the two institutions in the three months to September.
Controller of Budget Agnes Odhiambo wants the Treasury to recover all the money it has paid out on behalf of the agencies whose loans it guaranteed, but are not insolvent.
The government did not make any payments on behalf of the Kenya Broadcasting Corporation (KBC), which has together with two firms spent Sh16 billion of taxpayers’ money since 1989 on bailouts.
“The cumulative principal and interest payments of guaranteed loans to parastatals with liquidity problems amounted to Sh181.2 million against a target of Sh170.6 million for the period ending September 2014,” the Treasury said in its quarterly budget report to Parliament.
“The variance is attributed to differences in exchange rate movements,” it added.
KBC has been unable to repay a Japanese debt that has accumulated to Sh32.3 billion, which prompted the Treasury to repay the loan. But the government did not pay the loan in the quarter to September.
The Treasury stepped in to repay a loan that the defunct City Council of Nairobi (CCN) borrowed from USAid to build Umoja Estate more than three decades ago.
The 30-year loan was to be repaid by 2014 but City Hall has defaulted, leaving the Treasury to pay the residual amount plus interest. The State paid Sh38.75 million in the three months to September.
All CCN liabilities and assets have been transferred to the Nairobi County government, but that did not relieve the national government of the burden to service the debt.
Use of taxpayers’ money to bail out public institutions is, however, proving to be an unpalatable settlement that is expected to put the Treasury and City Hall under watch.
The State also stepped in to aid Tarda – now under the Rural Development department – which has also failed to repay money borrowed from Jica.
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