State firms burden public with debts

Taxpayers continue to shoulder a heavy burden from defaulted loans borrowed by parastatals for government guaranteed advances as public debt swells past the trillion shilling mark.

The Kenya Debt Relief Network in a new study reveals that non performing external loans appear to have been largely generated by parastatals, leaving the government with a total of Sh18 billion of unpaid amount from the parastatals.

Foreign loans

Due to financial mismanagement and political interference, State corporations that had taken foreign loans on government guarantee, were unable to reimburse the government debts.

“The unpaid balances raise the question over the initial assessment of financial viability and the ability of such institutions to service such loans before guarantees were issued by the government,” said Mr Vitalice Meja, consultant in his report commissioned by the Kenya Debt Relief Network.

Parastatals with the highest balances include Nzoia Sugar Company, Kenya Broadcasting Corporation and the City Council of Nairobi that owe the government about Sh6.1 billion, Sh4.3 billion and Sh3.3 billion respectively.

The 2009 Treasury data, also lists Tana and Athi River Development Authority (Tarda) - Sh1.4 billion, the then Kenya Posts and Telecommunications Corporation (which was split into Telkom Kenya, Postal Corporation of Kenya and the Communications Commission of Kenya) - Sh286.6 million, Kenya Railways - Sh639.8 million and Muhoroni Sugar Company - Sh302.5 million.

Kenya’s total public debt will hit Sh1.27 trillion this fiscal year, in what is expected to put more strain on Kenyans in servicing it.

This means that each (of the 40 million) Kenyan owe foreign and domestic creditors slightly more than Sh31,000, which is more than the take-home salary of many workers.