The government plans to widen its scrutiny of state corporations amid the planned sale of 11 enterprises that has so far been stopped by courts.
This year the National Treasury is putting 50 government agencies and parastatals under a financial performance appraisal to decide the ones that present the greatest fiscal risk to the government.
The exchequer is concerned that state corporations can be a major source of fiscal risk to public finances if they underperform financially.
Kenya has 248 State Corporations, out of which 46 are commercial enterprises, and 201 are non-commercial entities.
A high number of commercial state corporations are concentrated in the transport and energy sectors, performing strategic functions.
In the financial year 2019-2020, the commercial enterprises accounted for 85 percent of total revenues and 89 percent of total liabilities in the state corporations sector.
Non-commercial state corporations include universities and vocational training colleges, water development agencies and national hospitals.
Despite not disclosing the firms under its radar, Treasury maintains that the entities have strong social mandates to deliver core services to the citizens and are heavily dependent on Government transfers.
“In 2023/24 FY the National Treasury is undertaking financial evaluation for fifty State Corporations, using their FY 2022/23 audited accounts, and report the outcome to the Fiscal Risk Committee by End-June 2024,” Treasury Cabinet Secretary Njuguna Ndungu says in the 2024 draft budget policy statement.
According to Treasury, in the 2021/22 financial year fiscal risk analysis was undertaken on a sample of eighteen State Corporations, which established their fiscal risk exposure to the government.
The detailed financial evaluations and assessment highlighted a number of fiscal risks that could materialise.
National Treasury data shows that the maximum gross fiscal exposure of the 18 state corporations in the review period was estimated at Sh436.2 billion.
These stem primarily from liquidity challenges resulting from unfavourable revenue and economic performance.
It was established that they are unable to service short-term obligations when they fall due with 14 corporations found to have accumulated sizeable arrears.
The 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.
In the new plan the exchequer says it has customised the IMF Health Check Tool applied in undertaking the financial analysis.
“Debt stricken state corporations constitute a potential source of fiscal risk. However, the government is cautious in issuance of guarantees and other support measures to state corporations upon such requests,” reads the report in part.
The move comes at a time unpaid government bills have increased to Sh630.6 billion as of September 30, 2023.
These comprise Sh509.4 billion (73.4 percent) and Sh121.2 billion (26.1 percent) for the state corporations and ministries, state departments, and other government agencies.
Public entities have until February 2, 2024 to present details on pending bills in their books.
This follows a public notice by the Pending Bills Verification Committee requiring all accounting officers under the national government to supply details on their existing pending bills, procurement and contract documents relating to them, and explanations on those that have been settled.
