SOEs such as East African Portland Cement, Mumias Sugar, Kenya Power, Kenya Airways, Kenya Railways Chemilil Sugar, Muhoroni Sugar, Nzoia Sugar and Sony Sugar are either in losses or negative working capital implying their inability to service short term loans when they fall due. “These State corporations were chosen, given their size and strategic importance to the economy and society, thus holding a high implicit risk to government in that many of them are too strategic to fail,” said Treasury. The findings come after Treasury conducted a fiscal risk analysis on a sample of 18 State entities which identified liquidity challenges resulting from unfavourable revenue and economic performance as a common thread.
“This may pose serious fiscal risk and challenge to budget implementation as the National Treasury has to provide budgetary resources to bail out these State-owned enterprises and public companies in the budget year,” it says. Treasury says this obligates the State to bail them out from financial distress, despite the competing budgetary needs. Treasury estimates that 18 of the total SOEs in the country (about 260) may require Sh382 billion in the next five years to cover their liquidity shortfalls amid the debate on whether transfers to these entities matches the socio-economic benefits.įirms such as Kenya Power and Kenya Airways are considered as strategic and of national interest due to the overall impact their failure would have on the economy. Other exposures are contingent liabilities such as pending court cases (Sh109 billion) and potential liquidity injections for the clearance of arrears (Sh211 billion).
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