MPs oppose plan to write off State firms' Sh84.28bn loans
National Treasury Principal Secretary Julius Muia who was at pains to explain to MPs why the government plans to write off Sh84.28 billion in dormant loans owed by at least 17 State corporations.
MPs have questioned the government’s move to write off Sh84.28 billion in dormant loans owed by at least 17 State corporations because they are unable to repay them, even as the amounts advanced to them continue to increase.
The details of the dormant loans have been flagged by Auditor-General Nancy Gathungu in her report on the accounts of the National Treasury for the year 2018/2019, currently before Parliament.
“The loans had no movement and as previously reported, have remained unpaid over a significant period of time casting doubts on their recoverability,” Ms Gathungu says in the audit report.
The dormant loans represent 10 per cent of the total loan portfolio of Sh809.99 owed to the national government by about 260 State corporations as at June 30, 2019.
But the irony is that even as the State corporations face difficulties in repaying their loans despite being in operation, the government continues to give them billions of taxpayers’ money in the hope that they will stand on their own.
Unable to repay
The Public Accounts Committee (PAC) of the National Assembly, which is considering the audit report, was at a loss as to why the government would continue to pump money into these entities despite all the proof that they are unable to repay.
National Treasury Principal Secretary, Dr Julius Muia, while appearing on Monday before PAC, which is chaired by Ugunja MP Opiyo Wandayi, had a hard time trying to convince the MPs why the debts should be written off.
“The numbers are increasing and the water sector is a devolved function but is causing us a lot of problems,” Dr Muia told the committee, noting that a majority of the entities that cannot repay their debts are water service corporations.
However, Dr Muia’s response did not go down well with Mr Wandayi and committee members Aden Duale (Garissa Township), Joseph Ngugi (Gatanga), Dr Wilberforce Oundo (Funyula) and Dr Eseli Simiyu (Tongaren).
The MPs demanded that the managements of the affected State corporations appear before the committee to explain why they are unable to repay the debts.
“Have they come to you to say they cannot service their loans? Under what circumstances can you write off a debt? Something is amiss here” said Mr Wandayi.
“We will call them to explain what they are doing with the public money yet they are running,” Mr Wandayi added.
List of defaulters
On the list of defaulters include the perennial recipients of government money — the ailing Kenya Airways (KQ), which owes the government Sh24.22 billion, Mumias Sugar Company Limited (Sh3 billion) and National Irrigation Board (Sh2.3 billion).
In the first supplementary budget for the year 2020/21 approved by the National Assembly in March this year, the cash strapped KQ was allocated Sh10 billion as part of the nationalisation process.
Private company
Interestingly, the dormant loans include Sh27.7 million that was advanced to Halal Meat Products, a private company.
Mr Duale noted that it does not augur well for the figure to continue increasing yet the corporations cannot repay.
“So what are they doing with the money even as debt pileups continue to increase every financial year? They must come here to respond to these issues,” said Mr Duale.
Mr Ngugi warned that writing off the debts will open a floodgate of entities ready to default under the guise that the government will bail them out.
“They have no option but to repay these loans. They can’t be receiving taxpayers’ money yet they cannot honour their debt obligations. Why should they continue to get the money?” posed Mr Ngugi.
Dr Oundo was explicit that the management of “these debt ridden” entities should explain the projects they undertook with the monies.
“They should tell us if the projects that were meant to be financed by the public funds were actually realised,” said Dr Oundo. “The question of KQ is a going concern,” he added.
The water firms in the list of debtors include Lake Victoria South Water Services Board (Sh13.12 billion), Coast Water Service Board (Sh12.24 billion), Tanathi Water Services Board (Sh9.71 billion) and Lake Victoria North Water Services Board (Sh7.59 billion).
Others are Tana Water Services Board (Sh7.54 billion), National Water Conservation and Pipeline Corporation (Sh2.46 billion), Kenya Meat Commission (Sh940.24 million), Agricultural Finance Corporation (Sh475.12 million) and Water Resource Management (Sh362.61 million).
