State commits to parastatals reforms amid IMF, World Bank pressure

State commits to parastatals reforms amid IMF, World Bank pressure

Treasury building World Bank and the IMF pressure could soon force Kenya to sale off loss making state agencies and merge those with duplicate roles to plug budgetary deficits.

The two global lenders say this will cut revenue wastage and reduce borrowing, in what would see thousands of public servants sent home.

The National Treasury estimates that parastatals have a maximum fiscal exposure of Sh1.3 trillion, which equates to 13.6 percent of GDP, putting some of them on permanent bail-out that eats into the public coffers.

In it’s Draft 2022 Budget Policy Statement, the National Treasury says state corporations can be a major source of fiscal risk to public finances if they under perform financially.

A fiscal risk analysis performed this year, on a sample of 18 state corporations, indicated liquidity challenges resulting from unfavourable revenue and economic performance, Treasury says.

Restructuring of state agencies is part of IMF’s conditions for access to credit facilities announced this year, with the latest being a $264 million (Sh29.5 billion) loan which IMF reached a staff-level agreement with Kenya last week.

This will be subjected to executive board approval in coming weeks.

“The government will continue implementation of cost–cutting measures including parastatals reforms," CS Ukur Yatani says in the BPS.

This signals a possible merger and freeze on new employment going into the next financial year, starting July 1, 2022, as part of plans to cut fiscal deficit to the projected 6 per cent of GDP from the current financial year’s 8.2 per cent.

It is expected to further drop to 4.4 per cent in 2023/24.

In July, Kenya earmarked 18 state agencies for restructuring as part of the IMF conditions for access to credit.The move, the National Treasury said, was after a thorough financial assessment that revealed that the enterprises had an outstanding Sh170 billion in government-guaranteed debt as of December 31 last year.Listed for restructuring were Kenya Airways, Kenya Airports Authority, Kenya Railways Corporation, Kenya Power, Kengen, Kenya Ports Authority, and a number of public universities.Also targeted are Kenya Broadcasting Corporation, Postal Corporation of Kenya, Athi Water Works Development Agency and Kenya National Examinations Council.Others are Kenya Wildlife Service, Kenya Post Office Savings Bank, Kenyatta National Hospital and E.A. Portland Cement.A possible merger could be seen in agencies with duplicating roles, mainly in the ministries of agriculture, transport, tourism, energy, industrialization, trade and enterprise development, and sports, culture and heritage.According to Treasury, a number of agencies have reflected a high […]

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