Kenya faces shortage of US dollars forcing state-owned companies to delay payment of foreign debts
NAIROBI, Kenya- The shortage of US dollars in Kenya makes state-owned companies unable to pay their external debts on time.
Most of these SOEs face unsecured foreign currency debt worth KSH 75 billion, which exposes them to higher funding costs due to the sharp depreciation of the shilling against the US dollar.
National Treasury documents reveal that dollar loans account for three-quarters of the total unsecured public enterprise debt of KSH 99 billion.
The Treasury’s annual report on debt management for the year ending June 2022 also indicates that the cost of servicing dollar loans has increased for most state-owned enterprises due to the weakening of the 6 shilling. .8% against the dollar this year, which has increased the cost of buying US currency locally to pay external lenders.
The Treasury has over the past two years reported in more detail on the borrowings of state-owned enterprises, some of which are guaranteed by the Treasury while others are unsecured, meaning that their responsibility lies solely with to the contracting institution.
The fact is that most of these state entities are wholly or partly owned by the government, which means that a default on an unsecured loan would always be borne by the taxpayers, who would ultimately be called upon to pay them. replenish.
Currently, the Government of Kenya has 260 state-owned corporations, which finance their operations through internally generated revenue, borrowing and government transfers from the national treasury.
According to the Treasury in the Debt Report, “As of end-June 2022, of the 26 entities that submitted statements of outstanding loans, 19 SoE [State-owned enterprises] had unsecured debt amounting to KSH 99.3 billion (equivalent to 0.8% of GDP), loans are performing well and none were past due as of end-June 2022.
As a proportion of total unsecured debt outstanding, a majority existed in the energy sector with Kenya Power, Kenya Pipeline Company (KPC), KenGen, National Oil Corporation of Kenya (Nock), Kenya Petroleum Refineries Ltd and Geothermal Development Company (GDC) holding 76.8 percent.
National electricity utility distributor Kenya Power accounts for the largest share of the unsecured loan portfolio with a total of KSH 41 billion, of which KSH 31 billion is denominated in foreign currencies.
KPC is second with a syndicated dollar loan of KSH 15 billion, followed by Kenya Airports Authority, which has three dollar facilities worth a total of KSH 11 billion. KenGen owed KSH 9 billion to dollar lenders,
Reporting the stock of debt held by state-owned enterprises has been a major problem for the government in recent years, with the World Bank pointing out that failure to do so risks distorting the true picture of government debt. country. position.
Most of these parastatals are heavily indebted, compounded by persistent losses and cash flow problems.
A recent World Bank study estimated total liabilities, including debt, tax and social security arrears, owed by state-owned enterprises at 2.4 trillion shillings in 2020, warning that this poses a large risk for the government, which is ultimately responsible for this debt. .