NAIROBI, Kenya July 8 – The government has embarked on a review process of business models of 18 State Corporations that are facing financial shortfalls with the possibility of providing solutions.
Treasury Cabinet Secretary Ukur Yattani said the 18 organizations currently have a liquidity gap over the next five-year period of Sh382 billion, a reflection of their sizable financial woes.
“If these challenges are not addressed, they may crystallize into significant fiscal risks to Kenya’s economy,” he said.
Yattani noted that the 18 State Corporations have an estimated cumulative financial shortfall of Sh70 billion.
In his findings, Yattani noted that there is need “for a multi-faceted effort by all stakeholders to address the financial challenges facing the State Corporations including but not limited to possible reforms and restructuring through expenditure through rationalization, revenue enhancing measures and sealing of revenue leakages to minimize financial support from the Exchequer”.
He noted that the unprofitable State Corporations pose high fiscal risks to the government owing to their large debts they owe Treasury and the associated repayment risks as well as unsustainable pending bills.
Data by the Ministry shows that East African Portland Cement Company Plc (EAPCC), Kenya Broadcasting Corporation (KBC), Postal Corporation of Kenya (PCK) and Kenya Post Office Savings Bank (KPOSB) are loss-making due to competition which saw them lose their market share and revenue and as such, have incurred large tax and social security arrears.
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Social providers which have been identified as operating below cost recovery and are heavily dependent on exchequer allocations are Kenyatta National Hospital (KNH), Kenya National Examinations Council (KNEC), Athi Water Works Development Agency (AWWDA), Kenya Wildlife Service (KWS), University of Nairobi, (UoN) Jomo Kenyatta University of Agriculture and Technology (JKUAT), Moi University and Kenyatta University.
Only Kenya Ports Authority, Kenya Pipeline Company Ltd, Kenya Airports Authority and KenGen are profitable State corporations.
The financial evaluation is part of a deal reached between the Government of Kenya and IMF under the $2.34 billion (Kshs. 250 billion) 38-month facility approved by IMF Executive Board in April, and is intended to support the country’s COVID-19 response and weaknesses in SEOs.
Kenya has so far received Kshs. 76 billion ($714.5 million) under the facility after receiving second disbursement amounting Kshs. 44 billion ($407 million) mid last month.
The evaluation of state corporations was initiated by the government in response to existing structural issues in the financial performance which were further deepened by the Covid-19 pandemic.
The exercise was carried out with the technical support of the International Monetary Fund experts.
Kenya has about 260 State Corporations.
