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KenGen and Kenya Airways increase government guaranteed debt by over 20 billion shillings

The amount of government guaranteed debt to various parastatals increased by 20 billion shillings. The outstanding debt of public entities increased by 15% in the fiscal year ended June 2019 to reach 159.4 billion shillings from 138.8 billion shillings.

The Treasury said the government has not guaranteed any new loans, although some of the parastatals have taken on more debt, but within limits already guaranteed by the state.

During the same period, the government paid 1.3 billion shillings for troubled state-owned enterprises.

Companies that have increased their debt by huge margins include KenGen, whose stock of government guaranteed debt increased from 18 billion shillings to 43 billion shillings at the end of June 2019, from 25.78 billion shillings in 2018. The Kenya Ports Authority increased the amount of government guaranteed debt from Sh4 billion to Sh34 billion from Sh30.1 billion.

Kenya Airways, which holds the largest stock of publicly guaranteed debt, increased that amount to 76.7 billion shillings last year, from 75.7 billion shillings in 2018.

Financial distress

“As of June 30, 2019, the total outstanding debt guaranteed by the government was 159.4 billion shillings compared to 138.8 billion shillings as of June 30, 2018. It should be noted that although the government has not issued new guarantees during the 2018-2019 fiscal year, the total stock of guarantees has increased, ”the Treasury said in the draft fiscal policy statement for the 2020-2021 fiscal year.

“The increase to 20.6 billion shillings was attributed to the withdrawal of the debt already secured.”

The government also paid some 1.37 billion shillings to repay guaranteed debt to three financially troubled state-owned enterprises. KBC, East African Portland Cement Company (EAPCC) and Tana Athi River Development Authority (Tarda) were also unable to service some of their debts due to financial difficulties, shifting the burden of repaying debt. loans to their guarantor, the State

“In fiscal year 2017-2018, the government paid a total of 1.374 billion shillings on behalf of financially troubled state corporations, 301 million shillings on behalf of Tarda, 379 million shillings on behalf of the EAPCC and 739 million shillings on behalf of KBC, ”the Treasury said.

The Treasury document noted that with the exception of KBC, EAPCC and Tarda, “which failed in their obligation to repay state guaranteed loans, other state corporations are servicing their loans.”

The Treasury said it continued to support companies in financial difficulty, because of their strategic importance as well as the impact their collapse would have on the economy.

He noted, however, that the regular bailout of state-owned enterprises was weighing on its budget execution.

In a circular of December 20, 2019, the Treasury told parastatal organizations that it would not guarantee those who have not serviced their debt while enjoining them to cancel any new project to allow them to finance

“Crown corporations must prioritize debt service and payment of statutory obligations as the first charge on revenue. The Treasury will not grant its approval for borrowing or grant guarantees to state-owned companies that default on loans and other statutory obligations, ”the circular told all entities of the State.

“Crown corporations with loan arrears should provide clear proposals on how they intend to clear them… (those) in default of debt service and statutory obligations should reduce spending in other areas and slow down the implementation of new projects. ”

The Treasury has indicated that it will commit to identifying state-owned enterprises in financial difficulty and making recommendations on measures such as their restructuring, merger or liquidation to reduce the financial burden on the government.

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