The National Treasury is considering restructuring billions of shil-lings in loans owed by water services providers after years of near-total default left taxpayers exposed to mounting losses and stalled repayments on foreign and domestic borrowing.
Latest records show that a measly Sh2.5 billion out of Sh140.4 bil-lion to water agencies and utilities through on-lending arrangements over the years had been repaid as at June 2025. Ā This translates to an overall default rate of about 98.2 percent, or an outstanding balance of Sh137.9 billion.
Treasury officials have not disclosed the nature the restructuring will take, only indicating that it is intended to align debt servicing with county revenue flows.
This, the Treasury hopes, will unlock repayments from utilities that have struggled to collect and remit revenues following devolution of the water function.
āThe water sector continues to face financial challenges arising from ongoing legal reforms, given that water is a devolved function. Some County Government-owned Water Companies have not been remitting funds to the respective Water Agencies, thereby constraining debt-servicing capacity and exacerbating arrears accumulation,ā the Treasury wrote in the latest annual debt management report for the period ended June 2025.Ā
āAddressing these challenges will require stronger enforcement mechanisms to ensure timely remittances, clearer intergovernmental financing frameworks, and possible restructuring of water sector debt to align with county-level revenue flows.ā
Treasury typically borrows from foreign and domestic lenders and on-lends the funds to state-owned enterprises that play a strategic role in the economy, but cannot get funding on their own because of their weak financial positions.
As a prerequisite, the Treasury should ensure the projects funded through on-lent credit āhold a top-level priority on the development agenda of the governmentā.
However, weak project performance and poor remittance structures have turned many of these loans into quasi-grants.
Part of the loans are historical, with some dating back to the pre-devolution period when the utilities operated under defunct municipal and county councils.
The Treasury says the proposed plan will also look at strengthening enforcement mechanisms to ensure timely remittances and clarify in-tergovernmental financing frameworks.
The figures indicate that most water utilities and agencies have either not repaid anything or are servicing a fraction of their debt obligations.
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The Treasury records show a paltry two utilities out of 17 water sec-tor entities have shown meaningful repayment efforts.
Eldoret Water & Sanitation Company has repaid Sh849 million out of Sh1.06 billion disbursed, leaving about a fifth (19.8 percent) of the loan outstanding, while Nyeri Water and Sewerage Company has repaid Sh807 million out of Sh1.16 billion borrowed.
The repayment record signals that recovery may be possible where utilities have stronger billing and revenue collection systems.
The Athi Water Works Development Agency, the single largest borrower, has an outstanding balance of Sh61.96 billion out of Sh62.49 billion they received, a repayment rate of less than one percent.
The Central Rift Valley Water Works Development Agency has repaid Sh302 million out of Sh5.23 billion, leaving Sh4.92 billion, or 94.2 percent, outstanding.
Several agencies have not repaid a shilling. These include the Coast Water Works Development Agency (Sh16.86 billion outstanding), Tana Water Works Development Agency (Sh8.89 billion), Tanathi Water Works Development Agency (Sh5.38 billion), Northern Water Works Development Agency (Sh4.23 billion), and while the National Water Conservation and Pipeline Corporation āwhich has since transitioned to National Water Harvesting & Storage Authorityā owes Sh2.46 billion.Ā
The Lake Victoria North Water Works Development Agency has an out-standing balance of Sh16.16 billion out of Sh16.19 billion, a repayment rate of 0.2 percent, while the Lake Victoria South Water Works Development Agency has not repaid 99.9 percent of its Sh9.61 billion loan.
Kilifi Mariakani Water & Sewerage Company (which owes Sh1.26 bil-lion), Kwale Water & Sewerage (Sh1.39 billion), Malindi Water, Sewer-age & Sanitation Company (Sh1.58 billion), Mombasa Water & Sanitation Company (Sh1.30 billion), and Tavevo Water & Sewerage Company (Sh964 million) have all recorded zero repayment.
This has come at a time the Treasury announced that parastatals which have defaulted on loans will be barred from getting approval for further borrowing in a bid to slow down growing burden on taxpayers.
āThe National Treasury & Economic Planning will not give concurrence for borrowings or, where applicable, grant guarantees for State Cor-porations which are in default of loan repayments and pending bills,ā Treasury Cabinet Secretary John Mbadi told chief executives of State Corporations in December 2024 via a circular.
