NAIROBI, Kenya, Nov 7 – The National Treasury has established a Fiscal Risk Committee (FRC) to vet and approve all future government-backed projects after an audit by the Office of the Auditor-General (OAG) revealed Sh153.8 billion in unpaid on-lent loans by state corporations.
Treasury Cabinet Secretary John Mbadi, appearing before the National Assembly’s Public Debt and Privatisation Committee, said the new committee will ensure that any entity seeking on-lent loans undergoes strict financial evaluation before approval, to curb rising defaults that continue to burden taxpayers.
“The National Treasury has established a Fiscal Risk Committee, and going forward, all projects must meet strict financial evaluation criteria before borrowing approval is granted,” said Mbadi.
The move is part of sweeping reforms by the Treasury following revelations that only Sh1.6 billion — less than one percent of total on-lent loans — had been repaid by June 2024.
The Auditor-General’s report cited weak monitoring systems, poor reconciliation of loan ledgers, and sluggish debt recovery across multiple state entities as major causes of the default.
To address these gaps, the Treasury is rolling out the Government Investment Management Information System (GIMIS), a digital platform designed to track loan disbursements and repayments in real time. The system will link the Resource Mobilisation and Government Investments departments, replacing manual record-keeping that has contributed to repayment discrepancies.
“We are reviewing project management processes with a view to identifying implementation gaps and undertaking corrective action,” Mbadi added.
The reforms also target persistently defaulting state corporations. The Treasury said no new loans will be extended to entities that fail to meet repayment obligations, while structured repayment plans will replace the previous reliance on demand notices.
The water and transport sectors remain the biggest defaulters, with agencies such as the Lake Victoria North Water Works Development Agency and the Kenya Railways Corporation (KRC) struggling to remit repayments.
Mbadi confirmed that the Treasury had issued a demand letter to the Kenya Ports Authority to recover Sh6.27 billion in unremitted Standard Gauge Railway (SGR) revenues.
