The Cabinet wrote off, waived interest or restructured non-performing loans worth Sh8.73 billion owed by 23 cash-strapped State agencies in the year to June 2017, a report tabled in Parliament shows.
The Cabinet is yet to make a decision on 15 other cases that require a more complex and elaborate approach before concrete recommendations on either to write off, waive interest or restructure the bad debt is taken.
Of the 23 entities whose identities have not been disclosed, the Government’s top decision- making organ stepped in and wrote off debt owed by seven entities that faced financial distress.
Five entities collapsed or were liquidated while 11 were dormant entities, the National Assembly’s Public Accounts Committee (PAC) has revealed in the audited financial statements of the National Government for year 2016/17.
The report shows that the Cabinet considered a Treasury Memorandum and approved write-off loans amounting to Sh4.79 billion, the rest coming in form of waived interest and restructured debt. “The Cabinet considered the memorandum and approved waiver of accrued interest amounting to Sh2.91 billion,” the report states.
Also approved by the Cabinet is the restructuring of principal loans worth Sh764.34 million as well as conversion of loans amounting to Sh268.2 million to grants. “In view of the Cabinet directive, we updated the loan records to reflect the write off status and advised the respective entities to implement the Cabinet directive accordingly,” Julius Muia, the Treasury Principal Secretary said in submissions to PAC.
“The Cabinet Memorandum further directed the Cabinet Secretary National Treasury and Planning to prepare an additional Cabinet Memorandum to take care of the cases which may have been left out.”
He disclosed the Treasury has initiated the process for constitution of a taskforce to review the remaining 15 cases.
The Cabinet decision was communicated to the Treasury by the Head of Public Service Joseph Kinyua in a letter dated May 29, 2018.
The Treasury said privatisation process of some of the institutions that have huge debt especially in the sugar sector is ongoing. “It is expected that the outstanding loan arrears will be addressed through the balance sheet restructuring. The National Treasury continues to demand the amounts due and the latest demand letters are in the process of being sent to various institutions,” Dr Muia said.