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The Central Bank of Kenya is worried by a surge in parastatal loans. This comes after increased borrowing of billions of funds by parastatals to pay for operations and maintenance costs.

 

Most of the parastatals in the country are facing a lot of challenges, especially with the effect of Covid-19 pandemic. The pandemic led to losses or very small profits which cannot run the system at the parastatals.

 

The low incomes force the parastatals to go for loans at the CBK in order to carry out their tasks.

 

The worsened the situation at the state-owned enterprises (SOEs) was also caused by increased competition from cheaper goods & services as well as poor government policies.

CBK

 “The SOEs therefore used long term debt to finance operational expenses rather than for investments to generate revenues to service future debt. This limits productivity, capacity, and profitability of SOEs, and in turn their viability,” the bank said.

 

As at June last year, the parastatals accumulated a debt of Sh. 157.99 billion.

 

Among the parastatals with huge debts include Kenya Power and Lightening Company and the Kenya Airways. The two accumulates huge loans that can cause a huge risk to government.

 

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