The National Treasury is now charming offensive against State Owned Enterprises (SOEs), better known as parastatals over their continued reliance on the exchequer for their survival.
Kenya has 263 parastatals, a good number of which have been presiding over stalled projects valued at Ksh.1.1 trillion due to poor management.
“We have been talking about reforms of the sector for too long. Our fiscal space is so tight and I saw we have stalled projects worth Sh1.1 trillion. How can you preside over stalled assets of that magnitude?” questioned National Treasury Principal Secretary Chris Kiptoo.
Majority of these SOEs have been performing overlapping roles leading to lose of hundreds of millions.
According to the PS, there would be considerable reforms in the sector, where some enterprises will be privatised, merged and others strengthened to narrow a pilled pressure on fiscal risks to the Treasury.
“We must rid ourselves of their dependence on the exchequer,” added Kiptoo.
Some of the parastatals that have been struggling to stay afloat for close to a decade include Kenya Airways. The carrier has been surviving on government bailouts for its operational expenses and paying salaries.
Today, Kiproo said the state is exposed to risks amounting to Ksh.2.7 trillion should the SOEs fail to repay their loans.
These loans come from both commercial and multilateral lenders against guarantees by the Kenyan government.
Kiptoo’s remarks coincide with pressure from the recently released report dubbed “Macro-Fiscal Analytic Snapshot 2022/23” with recommendations for President William Ruto to ditch external borrowing and concentrate on reviving the ailing economy.
The report is by the Institute of Public Finance (IPF) dated January 23, 2023 with further recommendations for the Kenya Kwanza administration to consider the rising interest rates on debt.
“The last two years saw the government set revenue and fiscal deficit targets that were overly ambitious. With limited buffers against external shocks, the government is finding itself in a tight spot as it tries to navigate the global tightening of the monetary policy and rising debt interest payments,” said James Muraguri, the Chief Executive Officer of IPF.
Muraguri warned that recurring over-reliance on debts would leave the county with limited mitigations.