IMF pushes KPLC action plan to 2023
The International Monetary Fund (IMF) has given Kenya fresh conditions requiring Kenya Power and Lighting Company (KPLC) to fully bridge its financial gaps by end of 2023.
This is part of a raft of fresh reforms included in the $2.34 billion (Sh276 billion) loan programme signed in April 2021 under the Special Drawing Right (SDR) that is subject to IMF’s structural benchmark.
KPLC had in January reduced electricity bill by 15 per cent to cushion Kenyans from the high cost of living. However, the IMF says the move widened the power utility’s liquidly gap to a tune of Sh26.3 billion annually, cautioning against additional cuts.
Under the first tariff cut, consumers enjoyed savings of between Sh2.67 – Sh3.64 per unit of electricity, depending on their respective tariff category and consumption levels.
A further 15 per cent cut was to be initially effected in April as promised by President Uhuru Kenyatta, but turned costly to the exchequer, who delayed a July compensation of Sh7.05 billion to Kenya Power for the January cut.
The multilateral lender will by the end of July, submit to the government a comprehensive action plan on KPLC financial restructuring that must be implemented through the end of 2023.
“Considering the fiscal risks posed by KPLC, by end-July 2022, we will prepare and submit to the Cabinet Sub-Committee on KPLC an action plan to restore its medium-term profitability and cover fully any financing gaps (pre-existing and new) through end-2023 (new structural benchmark),” IMF said in the latest review.
The action plan will be done in collaboration with the National Treasury and the Ministry of Energy per the updated 2022 financial evaluations at KPLC and the findings of the 2021 Presidential Taskforce report on power purchase agreement (PPA).
It will identify steps that KPLC will take to improve operational efficiency and realize targeted cost saving by implementing a turnaround strategy that is premised on, among other things, reducing systems losses, increasing power sales, and restructuring of expensive commercial debt.