Treasury secretary Henry Rotich has raised the red flag over the growing risk posed by loans guaranteed by taxpayers on Kenya’s budget in the event of defaults.
The outstanding loans guaranteed by the Treasury more than doubled in two and a half years through last December.
Latest statistics by the Treasury show the outstanding debt contracted by firms fully or majority-owned by the State stood at Sh141.45 billion in December 2018 from Sh133.80 billion a year earlier and Sh60.53 billion in June 2016.
“Under various enabling legislation establishing State corporations, the corporations are legal entities with the capacity to borrow or contract debts and other liabilities,” Mr Rotich says in the Medium Term Debt Management Strategy released last month.
“The government through the National Treasury on-lends to respective State corporations and these may constitute a potential source of fiscal risk.”
The Treasury last year guaranteed a $138 million (Sh14.01 billion) loan taken by electricity supplier Kenya Power #ticker:KPLC, adding to big-ticket loans it guaranteed Kenya Airways #ticker:KQ and KenGen #ticker:KEGN to procure in recent years.
Kenya Airways’ loans guaranteed by taxpayers remained unchanged at $750 million (Sh76.39 billion) last December compared with a year earlier, while State-guaranteed loans held by KenGen fell to $107 million (Sh10.86 billion) from Sh25.94 billion.
Guarantees to Kenya Ports Authority (KPA) declined to $331 million (Sh33.70 billion) in December 2018 from $230.24 million (Sh23.77 billion), while the long-standing State-guaranteed loan at Kenya Railways Corporation rose to $45 million (Sh4.58 billion) from $40 million (Sh4.13 billion).
Mr Rotich said the Sh139.54 billion guaranteed to the five firms were performing as of last December. However, ailing State-controlled firms such as Kenya Broadcasting Corporation, East African Portland Cement #ticker:PORT and Tana & Athi Rivers Development Authority have failed to service past loans they procured from Japan International Cooperation Agency, a liability passed onto taxpayers.
By last December, non-performing loans held by the three firms were Sh1.92 billion, reduced from Sh2.54 billion in December 2017 and Sh4.82 billion in June 2016.
The stock of State-backed debt held by the KBC, which dates nearly 20 years back, reduced to Sh696 million in December 2018 from Sh1.033 billion a year earlier and Sh2.22 billion in June 2016.