KeNHA and National Oil top list of Sh14bn debt penalties and interest
KeNHA has defaulted on payment of Sh82.29 billion while Nock has failed to settle some Sh9.34 billion and Sh17.69 billion owed to Kenya Power, respectively.
State corporations have accumulated Sh14.52 billion in penalties and interest for unpaid debt, revealing the impact of cash-flow woes and mounting losses that have crippled some of the entities.
A new report by the Controller of Budget shows that Kenya National Highways Authority (KeNHA) leads the pack with accrued penalties and interest totaling Sh4.88 billion followed by the troubled National Oil Company of Kenya (Nock) with Sh3.84 billion and Kenya Power at Sh2.59 billion as at September 2024.
Most of the corporations, State-owned enterprises, and semi-autonomous government agencies have fallen on tough times, which coupled with budgetary cuts from the Exchequer, have made it hard for them to settle Sh396.16 billion worth of pending bills.
The National Treasury recently directed line ministries of the agencies mired in debt to continuously track progress or lack of it in paying the debts in order to reduce exposure of taxpayers.
“Continuous monitoring of these exposures is important to mitigate against any risks before they materialise,” the National Treasury said in a report last year.
KeNHA has defaulted on payment of Sh82.29 billion while Nock has failed to settle some Sh9.34 billion and Sh17.69 billion owed to Kenya Power, respectively.
The debts include loans that some of the entities tapped years ago in efforts to expand operations, and the struggles to clear the debts have prompted the government to earmark some of the entities for privatisation.
The Kenya Rural Roads Authority is facing a Sh1.08 billion penalty for defaulting on payment of Sh66.06 billion while the Nairobi Metropolitan Area Transport Authority has a penalty of Sh754.5 million for non-payment of Sh1.59 billion.
The penalties and interest are likely to be higher given that some of the agencies that have defaulted on paying billions of shillings have not indicated the amounts that they have been fined for the breaches.
Accumulation of the penalties and interest by the 12 agencies adds to the taxpayers’ burden given that the Exchequer has in the past come to the rescue of some of the entities.
The National Treasury has over the past few years been forced to extend bailouts to some of the entities to help them cover basic items like payment of salaries.
Some of the entities like Nock are caught up in losses that have made them technically insolvent, dimming any prospects of repaying their debts.
The National Treasury last year committed to clear billions of shillings that Nock owes KCB Group and Stanbic, in a bid to allow the oil marketer to enter into a deal meant to turn around its dwindling fortunes.
The government has since 2023 stepped up efforts to sell its stake in some of the entities, arguing it would cut unnecessary budgetary allocations for bailouts and free up funds for other projects.
The privatisation bid was, however, dealt a blow last year when the High Court declared the Privatisation Act, 2023 unconstitutional on grounds that it was enacted without adequate public participation.
