Kenya has bowed to International Monetary Fund (IMF) pressure to include Sh3.4 trillion parastatal and county loans as part of the country’s national debt.
The National Treasury said this will be done gradually beginning with foreign currency debts by parastatals before including loans from private public partnerships (PPPs), pension and county governments.
Currently, the Treasury only recognises guaranteed debts, but the IMF wants it to include all loans of State linked firms, a move that will push the country’s Sh7 trillion debt up by Sh3.4 trillion crashing through the Sh9 trillion ceiling set by Parliament.
Kenya has bowed to International Monetary Fund (IMF) pressure to include Sh3.4 trillion parastatal and county loans as part of the country’s national debt.
The National Treasury said this will be done gradually beginning with foreign currency debts by parastatals before including loans from private public partnerships (PPPs), pension and county governments.
Currently, the Treasury only recognises guaranteed debts, but the IMF wants it to include all loans of State linked firms, a move that will push the country’s Sh7 trillion debt up by Sh3.4 trillion crashing through the Sh9 trillion ceiling set by Parliament.
“The authorities noted the importance of expanding debt coverage to include counties, non-guaranteed debt contracted by the extra budgetary units, and State owned Enterprises (SOEs). They planned to take a gradual approach to monitoring contingent liabilities, for example, to start to monitor external borrowing by large SOEs,” the IMF said in the latest review on Kenya’s debt.
IMF report, Kenya’s Selected Specific Fiscal Risks, show that the government has guaranteed Sh139 billion which includes the Sh75 billion given to struggling Kenya Airways it wants to nationalise.
However, public companies, most of which are loss making have a liability of Sh1.494 trillion, PPP’s (Sh679 billion), Kenya Depositors Insurance Corporation (Sh261 billion), legal claims (Sh23 billion) and pensions (Sh819 billion).
Treasury officials were reluctant to take up these liabilities as debt claiming if a parastatal like KenGen or Kenya Power has borrowed it should not be part of public debt.
This comes even as Central Bank of Kenya warned that parastatals struggling with huge losses and bad governance could default on Sh100 billion borrowed from 35 banks.
In the Financial Sector Stability Report, CBK said State Owned Enterprises (SOEs) in the agriculture sector were able to service their loans, but those in the transport, trade and manufacturing sectors, have either delayed or stopped making payments.
The regulator said the loans have been classified in watch and doubtful categories considered as Non-Performing Loans.