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Economy

City Hall, KBC asked to refund Treasury Sh10bn

The Kenya Broadcasting Corporation offices in Nairobi. The State broadcaster owes the Treasury Sh7.1 billion in bailout cash. PHOTO | WILLIAM OWERI
The Kenya Broadcasting Corporation offices in Nairobi. The State broadcaster owes the Treasury Sh7.1 billion in bailout cash. PHOTO | WILLIAM OWERI 

Controller of Budget Agnes Odhiambo has asked the Treasury to recover Sh10.8 billion taxpayers have used to bail out City Hall, Kenya Broadcasting Corporation and Tarda after they defaulted on loans from international lenders.

The government has been repaying the loans borrowed from USAid and the Japanese Agency for International Development (Jica) for the past 26 years.

The Treasury has set aside an additional Sh1.3 billion this year to settle loans borrowed by the three underperforming State agencies and had spent Sh505.8 million in the six months to December.

Ms 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 is making the payments as the guarantor of the loans, that the lenders must hold accountable in case of default.

“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,” she said in the half year Budget implementation report.

If Treasury goes ahead to demand a refund of the amount, City Hall will have to pay Sh1.27 billion, KBC Sh7.1 billion and Tarda Sh2.4 billion.

Treasury paid Sh342 million for the KBC loan in the six months with the State broadcaster unable to repay a Japanese debt that has accumulated to Sh32.3 billion.

The State broadcaster says the money was borrowed on the strength of cashflows expected from the sale of television permits — then pegged at Sh1,000 for every television set.

The permit fees were outlawed with the liberalisation of broadcasting in 1997.

Treasury also stepped in to repay a loan that the defunct City Council of Nairobi borrowed from USAid to build Umoja II Estate more than three decades ago.

The 30-year loan was to be repaid by 2014 but City Hall defaulted, leaving the Treasury to pay the residual amount plus interest.

Although the City Hall liabilities and assets have been transferred to the Nairobi County government, the national government continues to bear the burden of this loan and parted with 38.75 million in the six months to December.

A move to recover the amount from Nairobi County would add to the City Hall’s mounting debt which has risen above Sh15 billion.

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.

Taxpayers paid Sh42.4 million as repayment this loan with the authority also claiming to suffer poor cashflow inhibiting its ability to honour the loan. Just like City Hall, poor cash flow has been the hallmark of Tarda and KBC.

The controller of budget has previously pointed out that the recoveries are based on the fact that these State agencies are not insolvent.

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