Reduce relief to own firms, IMF tells State
The International Monetary Fund (IMF) has put pressure on Kenya to sort out the state of risky State-owned enterprises (SOEs) and enhance their efficiency as part of a “near-term reform agenda.”
To tackle Kenya’s budgetary needs, debt vulnerabilities and tightening fiscal space, the IMF’s Executive Board Tuesday approved a $235.6 million (Sh27.96 billion) facility to help shore up Kenya’s, but said, there was need to deal with SOEs and improve the anti-corruption framework.
The IMF Executive Director and board chair Antoinette Sayeh said: “The near-term reform agenda should also focus on urgent structural policy challenges”, pointing out that Kenya must improve oversight of State Owned Enterprises (SOEs), improve anti-corruption framework, anti-money laundering and combat financing terrorism.
IMF said an effective follow-up of expenditure audits for transparency and accountability, was important.
“Building on the ongoing efforts to improve the oversight of State-owned enterprises, it is essential to advance the restructuring of Kenya Airways and restore the long-term viability of Kenya Power and Lighting Company,” Sayeh said adding that: “Further improvements in the anti-corruption framework and the AML/CFT agenda as well as an effective follow-up of expenditure audits are needed to enhance transparency and accountability.”
Reports indicate that a total 18 SOEs require $3.5 billion (Sh382 billion) to survive over the next five years, putting Kenya’s fiscal programme at risk. State owned firms like Kenya Power, Kenya Railways and East African Portland Cement are not profitable and have a combined financial shortfall estimated at Sh70 billion annually.
National Strategy
Last year, National Treasury Cabinet Secretary Ukur Yatani said authorities were working towards developing a national strategy to improve governance and financial oversight, as well as address the debt vulnerabilities of State Corporations (Scs).
Treasury selected major State Corporations based on the size of their activities to undertake an in-depth financial evaluation and fiscal risk analysis. While the over 260 State Corporations (SCs) play an important role in the economic and social development of the country by providing essential social services and achieving strategic commercial objectives, they are also bleeding the taxpayers raising concerns. However, the financial performance and operational efficiency of many have been deteriorating in recent years, weighing heavily on public finances by increasingly relying on budgetary support from the National Government through grants, subsidies, government loans and debt guarantees.
Of the state enterprises the National Carrier Kenya Airways (KQ), received Sh28 billion from the Exchequer in the Supplementary Budget 2020/21 to help it meet its liquidity needs and debt obligations.
This even as the government abandoned plans to nationalize the flailing airline, after Parliament voted in favour of Nationalising it in July 2019. IMF has been supporting the evaluation of State Corporations that was initiated by the Government in response to the existing structural issues.
