The Kenya Railways Corporation (KRC) is the government's most indebted agency, with a debt of Sh547 billion, largely due to loans borrowed from China to finance the construction of the Standard Gauge Railway (SGR) line. This debt is a significant portion of the total Sh880.75 billion owed by five state agencies. The SGR has been in operation since mid-2017, running passenger and cargo services between Mombasa and Suswa.
Kenya Airways is the second-most indebted agency, owing the government Sh122.9 billion by the end of June, with unpaid debts stretching back 15 years to when it started an ambitious expansion drive dubbed Project Mawingu. The airline's failure to dominate the African market, external factors, and mismanagement triggered successive losses, prompting the government to step in on multiple occasions to rescue Kenya Airways from collapse.
The Kenya Electricity Generating Company (KenGen) owes the government Sh75.8 billion, while its sister utility firm, Kenya Power, holds a Sh72.7 billion debt. However, unlike KRC and Kenya Airways, the energy firms have repaid a total of Sh83 billion, lowering their indebtedness. Athi Water Works Development Agency also owes the government Sh61.9 billion in loans issued by Treasury to finance bulk water and sewerage infrastructure projects.
The debts by the five agencies constitute 84.4 per cent of loans issued to 49 agencies and companies where the State has stakes in. By the end of June, the 49 agencies owed the government Sh1.04 trillion, including loans issued directly to them or on-lent from external creditors. The majority of the agencies the government loaned to have been struggling, forcing the Cabinet to approve the write-off of Sh26 billion in loans in the last financial year.
The Cabinet approved the write-off of Sh13.29 billion in non-performing government principal loans and the waiver of Sh13.04 billion in accrued interest arrears. Treasury said the write-offs were part of efforts to address long-outstanding audit queries on non-performing government loans. Agencies whose defaulted loans were written off included Kenya Meat Commission, Moi University, and Co-operative Bank of Kenya.
Overall, less than half of the agencies that were loaned cash by the government have made any repayments. The 23 agencies have repaid Sh92.16 billion, about 8 per cent of the Sh1.15 trillion that was originally disbursed. Agencies that have made some repayments include KenGen (Sh57.77 billion), Kenya Power (Sh25.57 billion), and Kenya Airports Authority (Sh2.1 billion).
Treasury observed that by the end of June, agencies that have been loaned money directly by the government or received loans on-lent from external creditors had delayed repaying Sh568.9 billion. This includes delayed payments of Sh374.79 billion in principal amounts and Sh194.1 billion in interest. Treasury reckons that the government needs to strengthen recovery of loans issued to agencies and restructure some of the loans where agencies are struggling.
Key points
- Kenya Railways Corporation (KRC) is the government's most indebted agency, with a debt of Sh547 billion.
- Five state agencies owe the government a total of Sh880.75 billion in debts.
- Less than half of the agencies that were loaned cash by the government have made any repayments.
