Treasury to cover costs of state-owned firms’ Sh266 billion loan defaults
The mounting defaults are raising concerns about the sustainability of Kenya's public debt, which now stands at Sh10.6 trillion.
Kenya's public institutions are struggling to meet their financial obligations, with 28 state-owned entities defaulting on loans totalling Sh266.5 billion.
The government, through the National Treasury, will now have to step in to settle these arrears, placing the burden of repayment on taxpayers.
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These defaults are part of a larger debt crisis, with the Treasury projected to cover a staggering Sh946 billion in loans given to public institutions.
The defaults span a range of government agencies, with some of the most notable defaulters being Kenya Railways, which owes Sh737.5 billion, Kenya Airways (Sh99.9 billion), and the Coast Water Works Development Agency (Sh20.6 billion).
The Rural Electrification Authority also ranks among the top defaulters, with a debt of Sh13.6 billion.
As of June 2024, the outstanding on-lent loans for 54 public entities reached Sh1.19 trillion, but it is the 28 defaulting institutions that represent the bulk of the burden, accounting for 79.5 per cent of this debt.
The latest report from the Treasury reveals that out of the total loans, only Sh64.6 billion has been repaid by some of these entities, a mere seven per cent of the total on-lent loans.
Furthermore, loans worth Sh2.3 billion, mainly for the sugar sector, have been written off following political intervention in recent years.
The mounting defaults are raising concerns about the sustainability of Kenya's public debt, which now stands at Sh10.6 trillion.
On-lent loans alone make up 11 per cent of this total, and the failure to repay them threatens to increase the already heavy burden on the Treasury.
In the fiscal year leading to June 2024, Kenya's debt servicing costs surged by more than Sh300 billion, reaching a total of Sh1.56 trillion.
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