Counties, universities, State firms to disclose loans every 3 months

Parastatals, public universities and counties will now be required to disclose loans every three months in a deal between the Treasury and the International Monetary Fund (IMF) aimed at enhancing transparency in the size and management of public debt.

The Treasury adopted a recommendation by the IMF to expand coverage of public debt to include all loans held by entities partly or fully funded by the State. Presently, the Treasury only captures loans it has guaranteed when compiling quarterly public debt reports.

Under the new framework, it will now be required to include all loans of State-linked firms as annexes when making periodic reports to the IMF and its sister organisation, the World Bank Group.

“What’s new in this commitment under the IMF programme is that Kenya is required to expand coverage of debt reporting to include parastatals, State-owned agencies like universities and county government debts,” director-general for public debt management at the Treasury, Haron Sirima, told the Business Daily.

“The objective is to enhance the transparency of debt information. Implementation is immediate.”

More than half of Kenya’s 247 parastatals posted either a deficit or a loss in the last financial year that ended in June 2020, according to the Treasury.

The majority of the poorly managed parastatals reporting losses or deficits in their budgets have over the years turned to commercial loans on the strength that they will be bailed out by taxpayers, in addition to using assets such as land as security.

Some of the State-linked firms, which have in recent years run into budget deficits or huge losses are Kenya Railways Corporation (Sh24.2 billion as of June 2020) and Kenya Broadcasting Corporation (Sh9.8 billion).

Others are sugar millers such as Mumias and Nzoia, East African Portland Cement, which is struggling to service Sh6 billion loan from KCB Group and even universities such as the University of Nairobi which had a deficit of Sh2.23 billion as of June 2020.

The Treasury in 2019 sought the IMF’s technical assistance in improving the quality of fiscal and public debt data. The IMF conducted an assessment between October 7 and 16, 2019, the findings of which were published on Monday.

“The authorities decided that the TNT (the National Treasury) and the Central Bank of Kenya work together in compiling the necessary quarterly PSDS (public sector debt statistics) data and that the public debt management office should be responsible for submitting the PSDS data to the IMF/WB database,” said the IMF report.