Editorials

Intensify parastatal reforms

treasury1

National Treasury building. FILE PHOTO | NMG

BDgeneric_logo

Summary

  • A new report by financial regulators has once again highlighted the urgent need to step up reforms of State-owned enterprises.
  • The State-owned firms are also relying on borrowings to fund normal operational expenses like paying salaries and rent.

A new report by financial regulators has once again highlighted the urgent need to step up reforms of State-owned enterprises.

The Central Bank of Kenya, the Capital Markets Authority, the Insurance Regulatory Authority, the Retirement Benefits Authority and the Sacco Societies Regulatory Authority are among the institutions that established that many parastatals sank into losses last year.

The State-owned firms are also relying on borrowings to fund normal operational expenses like paying salaries and rent.

This is clearly not sustainable and the debt burden will ultimately be borne by taxpayers.

The government should intensify parastatal reforms, including by entrenching good governance, merging the weak ones and privatising others in which the State does not have a strategic interest.

Failure to clean up the firms will have wider negative ramifications as the authors of the report warned.

The financial regulators say parastatals’ financial problems pose a real risk to the broader economy due to their huge footprint on the business value chain, where thousands of small firms survive on supplying goods and services to these institutions.

They also pose a risk to the banking sector.