No more idle cash in banks, Treasury tells State agencies

The Kenyan government has banned semi-autonomous government agencies (SAGAs) from holding idle cash in banks under a new public finance reform plan seeking to enhance transparency and efficiency.

National Treasury Cabinet Secretary Njuguna Ndung’u disclosed that the exchequer has adopted a hybrid model of Treasury Single Account (TSA) where ministries and state departments (MDAs) will operate accounts at the Central Bank of Kenya while the SAGAs’ accounts will remain in commercial banks on condition that no idle cash will be kept in them.

“... the National Treasury will be given visibility to monitor the balances and ensure no idle cash is retained by public entities,” Prof Ndung’u said in a statement on the supplementary estimates for the 2023/2024 fiscal year.

“In the meantime, the National Treasury is taking stock of the SAGAs bank accounts in commercial banks.”

Most government accounts in commercial banks are owned by State corporations and SAGAs, according to the National Treasury.

MDAs mostly bank with CBK. Removing a huge chunk of government deposits from commercial banks is likely to reduce the funding and liquidity of some of the lenders. In total, 177 parastatals listed by Treasury held Sh201.05 billion in banks by December 2023, with those in energy and infrastructure sectors having the healthiest bank balances.

According to Treasury, bankers have already been prepared for the impending withdrawal of government deposits.

“Yes, they (banks) can’t be comfortable. Eventually, the government will move significant balances from them.

They have been sensitised to prepare and adjust to this reality eventually,” Treasury’s director-general incharge of accounting services and quality assurance Bernard Ndungu said in an earlier interview.

“But it’s not true that all the accounts in commercial banks will be closed. Public entities will continue to hold operational accounts in commercial banks, but all the idle funds and deposits will be held at CBK,” he added.

In 2018 East African Community (EAC) partner states agreed to close down multiple bank accounts operated by their MDAs and keep their cash in a single account as part of efforts to increase transparency and accountability in the use of public funds.

The states agreed on the TSA to ensure proper oversight of government cash flows and to reduce the cost of keeping public money in several commercial banks.

Kenya is moving faster on this front, with the piloting of the initial phase involving MDAs currently ongoing. The second phase involves counties while the third one involves State corporations and SAGAs.

The full implementation of the TSA is expected to happen within a three-year period.