The Kenya Railways Corporation (KRC) topped the list of heavily indebted state corporations in June of this year.
This was after several years of absorbing billions of shillings per year for the construction of the Standard Gauge Railway (SGR).
The company’s total debt stood at 539.27 billion shillings at the end of fiscal year 2019/20.
This was more than half of the 933.6 billion shillings in outstanding loans that all government agencies took out in June 2020.
While the KRC stood out in terms of the money it owes lenders, much of the loan was advanced by the Export-Import Bank (Exim) of China.
KRC has since slowed down lending in the last fiscal year, following the completion of phase 2A of the RMS from Nairobi to Suswa.
This can be seen in the amount of loans taken out by government agencies during the year, down 56% from the fiscal year ended June 2019.
“During the year, loans taken out by the state-owned sector amounted to 113.59 billion shillings, compared to 260.35 billion shillings in fiscal year 2018/19,” noted the consolidated report on government treasury investments 2019/2020.
“The reduction in loans taken out during the year compared to the previous period was attributed to the lower drawdown on the China Exim SGR loan. During this period, phase 2A of the SGR project was completed.
The amount owed by state corporations – through direct government loans or on-lending by the state to domestic and external lenders – has increased over the years, reaching Sh 933.6 billion in the fiscal year ended. in June 2020.
This is 829.09 billion shillings in fiscal year 2018/19 and 718.32 billion shillings in fiscal year 2017/18.
“The increase was attributed to loans taken by the government and on-lent to the Kenya Railways Corporation for the implementation of the SGR. Therefore, KRC had the highest stock of unreleased government loans at 539.27 billion shillings, ”the Treasury said in the report.
During the fiscal year ended in June 2020, the State paid debts on behalf of entities in difficulty and unable to service part of the loans it guaranteed.
These include the state broadcaster KBC, the East African Portland Cement Company (EAPCC) and the Tana Athi River Development Authority (Tarda).
“During this period, the government paid 661.2 million shillings under the so-called debts owed by the two state-owned enterprises as follows: 365.4 million shillings on behalf of the EAPCC and 295.8 million shillings on behalf of KBC, ”Treasury said in the report.
Despite Crown corporation compensatory loans guaranteed by the government, outstanding loans continued to grow as other government entities continued to incur secured debts.
While the government has slowed down the guarantee of new loans by parastatals in recent years, some may have taken on more debt, but within limits already guaranteed by the state.
State guaranteed loans reached 160.45 billion shillings through June 2020, compared to 154.8 billion shillings.
According to the Treasury report, only three companies are responsible for the stock of secured debt – Kenya Electricity Generating Company (KenGen), Kenya Ports Authority (KPA) and Kenya Airways (KQ).
In recent years, the three have increased the amount of government guaranteed loans, with KPA nearly doubling in three years to 39.37 billion shillings in 2020, from 21.83 billion shillings in 2017.
While KenGen has significantly reduced the amount of government guaranteed debt to 41.18 billion shillings this year, from 43 billion shillings in June 2019, it has also significantly increased from 27.7 billion shillings in 2017.
KQ’s public debt stood at 79.89 billion shillings in June 2020, an increase from 76.7 billion shillings in 2019.
Prior to that, it had declined slightly from 77.78 shillings in 2017. “The increase was mainly attributed to the withdrawal of secured loans to KPA and Kenya Airways,” the Treasury said in the report.