Cash-rich parastatals cut Treasury payouts Sh66bn on Covid hit

Cash-rich parastatals cut disbursements to the Treasury in support of government operations by Sh66 billion in the year ended June 2021, underlining the impact of the pandemic on revenue streams.

The Treasury received Sh4.12 billion in surplus funds from parastatals in the review period, a steep slide from Sh70.1 billion mobilised a year earlier — reflecting a 94 percent drop.

The surplus cash surrendered fell short of the revised Sh24.4 billion target on the back of partial trade shutdowns and travel restrictions, which hit company earnings, including state-owned enterprises.

“The mop-up of surplus or idle funds from the parastatals, an exercise which was initiated in FY (fiscal year) 2019/20 did not yield much in FY 2020/21 at the backdrop of the Covid-19 pandemic,” the Treasury says in exchequer disclosures for the year ended June 2021.

The pursuit of cash in parastatals followed miscellaneous amendments to the Kenya Revenue Authority (KRA) Act and Public Finance Management Regulations, through the Finance Act 2018, which empowered the taxman to collect 90 percent of surplus funds in regulatory agencies.

The Treasury had targeted Sh78 billion in the inaugural year ended June 2019 but ended up with Sh8 billion.

At the time, the KRA blamed the gaping underperformance on a lack of a specific legal date that funds were due to be remitted by the State agencies as well as the absence of enforcement measures.

Parastatals are among the top buyers of government securities, which means the Treasury ends up borrowing public money and paying interest on it.

Latest Central Bank of Kenya (CBK) data shows the share of parastatals in government papers stood at Sh212.32 billion on October 1 compared with Sh203.71 billion on June 30 and Sh189.21 billion on October 2, 2020.

The Treasury has defended the mop-up of the surplus cash, arguing the funds have helped fill a budget hole, which would otherwise be filled through borrowing.

“We’re not doing it without consultation, we’re looking at their balance sheets, projected requirements going forward and how much of their surplus funds will be remitted to the Treasury. So it is a very orderly way in which we are doing it,” Treasury PS Julius Muia told the Business Daily in a past interview.

“It has happened in the past but it has not been targeting all State corporations as it is happening now. It’s only that we want to be more formal how we do it this time round in a more orderly way.”