Economy

Defaulting EAPCC, Tarda cost taxpayers Sh661m

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The State guaranteed Sh1 billion loan from Japan Telecoms Engineering in 1989 for the expansion of the broadcaster. FILE PHOTO | NMG

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Summary

  • Treasury paid Sh365.4 million in guaranteed debt for EAPCC and Sh295.81 million for the Tarda in the quarter ended March.
  • The payments overshot the allocated budget by Sh21. 19 million with Treasury Secretary Ukur Yatani attributing it to the weakening of the shilling against the Japanese Yen.
  • Companies for whom the national government makes the repayments have for years included EAPCC, Tarda and the Kenya Broadcasting Corporation.

Taxpayers have lost Sh661.2 million in a bailout of two cash-strapped parastatals in the quarter ended March, documents tabled in Parliament.

The quarterly economic and budgetary report shows that Treasury paid Sh365.4 million in guaranteed debt for East African Portland Cement Company (EAPCC) and Sh295.81 million for the Tana and Athi River Development Authority (Tarda).

The report further shows that the payments overshot the allocated budget by Sh21. 19 million with Treasury Secretary Ukur Yatani attributing it to the weakening of the shilling against the Japanese Yen.

Companies for whom the national government makes the repayments have for years included EAPCC, Tarda and the Kenya Broadcasting Corporation.

The State broadcaster was however excluded in the latest review.

“The actual guaranteed debt payment was higher than target because of depreciation of the Kenya shilling against the Japanese yen by the time of actual payments,” he said in the report tabled in Parliament last week.

This means the struggling cement maker and the water agency took the entire allocation for guaranteed debt in the financial year 2019/20.

The parastatals took the loans when they were struggling but they have found it difficult to repay.

The publicly guaranteed loans are part of the contingent liabilities of the State, which weigh heavily on the taxpayers due to their growing losses resulti ng in inability to pay loans.

Mr Yatani in the budget preparation for the year starting next month froze fresh loan guarantees and approvals for State corporations, which have defaulted on repayment of debt and other statutory obligations.

A recent report by the International Monetary Fund shows that the amount that the National Treasury has guaranteed in loans to parastatals stands at Sh139 billion — underlining the huge burden that the poorly-performing entities are saddling taxpayers with.