The budget controller wants the Treasury to stop guaranteeing loans to State agencies that are profit-making to ease pressure on the Exchequer.
Controller of Budget (CoB) Margaret Nyakang'o says the Treasury should review the portfolio of guaranteed loans to transfer the servicing obligations directly to the entities.
The push, if successful, could see entities such as KenGen and Kenya Ports Authority (KPA)— which have for years been some of the best-performing State entities — directly take over their Treasury-guaranteed loans.
The Treasury has over the years guaranteed loans to State-owned agencies with the portfolio jumping to Sh161.18 billion in the year that ended June from Sh145.36 billion in the financial year to June 2022.
“The National Treasury has, over the years, acquired and absorbed loans on behalf of profitable Semi-Autonomous Government Agencies. These loans should be reviewed with the aim of transferring payment obligations to the agencies,” Dr Nyakang'o says.
The move is meant to ease the weight of debt payment on the Exchequer as some of the entities, notably, KQ, have since fallen on tough times and hurt its ability to repay its share of guaranteed loans.
The loans were mainly to fund capital-intensive projects, especially those undertaken by KenGen and KPA.
The loss-making Kenya Airways has the highest chunk of guaranteed loans at Sh79.5 billion as of June followed by KPA at Sh50.5 billion and electricity producer KenGen at Sh31.1 billion.
Payment of government-guaranteed loans to parastatals is done from the Consolidated Fund Services alongside debt servicing, salaries, pensions, and gratuities.
Unlike KenGen and KPA, Kenya Airways has been in a loss-making territory for years and instead increasingly turned to the Treasury for bail-outs, further straining the Exchequer.