The National Assembly budget and appropriation committee has directed the National Treasury to cancel a Sh90.7 billion debt allegedly owed to it by the Kenya Broadcasting Corporation (KBC) following questions about the validity of the loan.
The debt relates to the exchequer’s takeover of a loan contracted from the Overseas Economic Cooperation Fund (OECF) of Japan in 1989 which funded the State corporation’s modernisation programme.
“By September 30, 2024, the Cabinet Secretary for the National Treasury, in collaboration with the State Department for Broadcasting and Telecommunication should ensure that the necessary book reconciliations regarding the Japanese loan are concluded and consequently expunged from the liabilities of Kenya Broadcasting Corporation,” the committee said in a report on its consideration of the 2024/25 budget estimates.
In its audit of KBC books for the year ended June 2022, the Auditor General expressed difficulties in confirming the outstanding loan balance amid the non-disclosure of key financial statements by the exchequer relating to the facility.
KBC had requested the National Treasury to meet the loan payment obligation after its inability to settle the outstanding facility.
According to the 2021/22 KBC annual report, KBC had expected to reimburse the exchequer a loan facility at market interest rates and made subsequent provisions between the 1992/93 financial year and 2021/2022, paying up a total of Sh13.6 billion.
At the same time, the State corporation indicated that the Treasury had charged interest of Sh77 billion over the years on the loan and showed a schedule of payments up to June 2022.
The Auditor General however challenged the interest payments, noting it exceeded the principal amount.
“The principal loan amount was Sh13.6 billion but has over the years accrued interest amounting to Sh77 billion. This violates the duplum rule as the loan is non-performing and the accrued interest exceeds the principal amount,” the Auditor General notes in the audit of KBC financials.
According to the Auditor General, further records provided in the audit indicated a demand note on the payments by the Japan International Cooperation Agency (JICA) amounting to Sh1.6 billion in November 2019.
During the 2019/20 financial year however, the National Treasury only made payments amounting to Sh335,207 on behalf of KBC but there were no disclosures on the amount due and unpaid.
“It was not possible to determine the balance of the Japanese loan since the payments made on behalf of KBC by the National Treasury are inclusive of loan principal, interest, and overdue charges,” the Auditor General added.
“In the circumstances, the accuracy and completeness of the Japanese loan principal and loan interest balance of Sh90.7 billion could not be confirmed.”
The cancellation of the debt due to the exchequer is expected to clear a significant portion of KBC’s liabilities.
As at the end of June 2022, the State Corporation listed Sh93.6 billion as current liabilities, the bulk of which represented the government loan and Sh2.9 billion in trade and other payables.
In the year to June 2022, KBC narrowed its loss to Sh174.5 million from a loss of Sh313.2 million previously.
The ICT Ministry has recently appointed Agnes Kalekye Nguna as KBC’s new Managing Director and CEO to guide the State corporation into its next phase of growth.
