- The Treasury’s Public Debt Management Office (PDMO) said it cut planned spending on external debt by 18.06 percent to 328.13 billion shillings after some state-owned enterprises repaid part of the loans.
- The Treasury had anticipated that some parastatals would default on loans taken from foreign lenders, forcing the state to step in given that it had guaranteed the debt.
- The Covid-19 pandemic has challenged Kenya’s tax revenue collection at a time when more of its debt was coming due.
Kenya has saved 72.33 billion shillings in external debt payments to countries like China after parastatals resumed servicing loans ahead of schedule in the wake of the Covid-19 economic woes, the report has revealed. Treasure.
The Treasury’s Public Debt Management Office (PDMO) said it cut planned spending on external debt by 18.06 percent to 328.13 billion shillings after some state-owned enterprises repaid part of the loans.
The Treasury had anticipated that some parastatals would default on loans taken from foreign lenders, forcing the state to step in given that it had guaranteed the debt.
Revised budget estimates tabled in the National Assembly show that spending on debt principal owed to major bilateral lenders this fiscal year has been cut by 60.03 billion shillings, while interest payments have fallen by 12.31 billion shillings.
“External debt repayments have been revised downwards following better performance by parastatals which initially believed they would not be able to repay their external debts due to the negative impact of Covid on the economy. “PDMO chief executive Haron Sirima said via text message.
Data shows that China’s Exim Bank, Japan, Italy, Germany and France accounted for half of the debt reduction for this fiscal year ending June 2022.
The Covid-19 pandemic has challenged Kenya’s tax revenue collection at a time when more of its debt was coming due.
Companies have also had to deal with a drop in demand for their products following layoffs, causing payment defaults.
Debt owed to China’s Exim Bank, which has financed some of Kenya’s infrastructure megaprojects such as the standard gauge railway, fell from 19.66 billion shillings to 77.03 billion shillings, marking the highest sharp decline among bilateral lenders.
Reimbursements to Japan were reduced from 5.99 billion shillings to 5.15 billion shillings and to Italy from 5.13 billion shillings to 14.31 billion shillings.
Those to Germany and France are down 3.06 billion shillings and 2.20 billion shillings to 3.88 billion shillings and 12.67 billion shillings respectively.
The savings of 72.33 billion shillings will provide relief to the Treasury which faces rising unforeseen expenditure which will see taxpayers spend an additional 108 billion shillings in the budget for the financial year ending in June.
The Treasury typically borrows cash from foreign lenders to on-lend to state-owned enterprises that play a strategic role in the economy but cannot obtain financing on their own due to their poor financial condition.
As a precondition, the Treasury should ensure that the projects financed by the on-lending “occupy a priority place in the development program of the government”.
In debt declarations for the year ending June 2021, the Treasury revealed that outstanding loans on-lent to government-controlled entities amounted to 921.93 billion shillings, a growth of almost 54.93 billion shillings, or 6.34%, compared to 867 shillings. 01 billion a year earlier.
“The majority of state-owned enterprises are facing financial constraints and have requested that their loans be cancelled,” Treasury officials wrote in the annual debt report for the period to June 2021.
At the time, the deteriorating financial health of state-controlled companies was laid bare, with the Treasury revealing that it had written off 37.06 billion shillings in on-lent loans.
The written-off onlent loans were part of just over 74.01 billion shillings overdue during the reporting period, comprising 38.03 billion shillings in principal and 35.98 billion shillings in interest.
Treasury disclosures had shown that 41 of the 56 parastatals that had government-loaned credit failed to repay it in the year ending June 2021.
Most of the parastatals that had not repaid their on-lent loans by the end of the previous fiscal year were in water and irrigation (22.72 billion shillings), transport and infrastructure (17.46 billion shillings), planning and decentralization (15.56 billion shillings) and agriculture and livestock (12.64 billion shillings).
The Treasury reported that parastatal water and irrigation companies were notorious defaulters on their total debts which exceeded 169.44 billion shillings at the end of June 2021.
The data showed that only Nyeri Water & Sewerage (Sh65.23 million), Eldoret Water & Sewerage Co. Ltd (Sh39.96 million) and Lake Victoria North Water Services Board (Sh10.65 million) serviced their facilities on-lent for the year ended last June on more than 15 water and sanitation companies with outstanding loans.
“Most of the waterworks development agencies are facing financial difficulties and as a result are unable to meet their loan obligations,” the Treasury said in the report.
“An inter-ministerial committee has been formed to review all water sector loans and recommend mitigation measures to be adopted.”