Kenya Railways loans grow to Sh539b

Passengers scramble to board a Nairobi commuter train at Pipeline station in Embakasi recently. [Stafford Ondego, Standard]

Kenya Railways Corporation (KRC) topped the list of highly indebted State corporations as of June this year.

This was after several years of absorbing billions of shillings annually for the construction of the Standard Gauge Railway (SGR).

The corporation’s total debt stood at Sh539.27 billion at the end of the 2019/20 financial year.

This accounted for more than half of the Sh933.6 billion outstanding loans that all government owned agencies have taken as of June 2020.

While KRC stood out in terms of the money it owes lenders – a big chunk of the loan was advanced by the Export-Import (Exim) Bank of China.

KRC has since slowed down on the uptake of loans over the last financial year, following completion of the Phase 2A of SGR from Nairobi to Suswa.

This is seen in the amount of loans government agencies took up during the year, with the amount declining 56 per cent when compared to the financial year to June 2019.

“During the year, loan procured by the State corporation sector amounted to Sh113.59 billion down from Sh260.35 billion in 2018/19 financial year,” noted Treasury’s Consolidated Government Investment Report 2019/2020.

“The reduction in loans procured during the year compared to the previous period was attributed to lower drawdown of China Exim SGR loan. During this period, phase 2A of the SGR project was completed.”

The amount owed by State corporations – through direct loans from government or on-lent to them by the State from domestic and external lenders – has been on the rise over the years, growing to Sh933.6 billion in the financial year to June 2020.

This is from Sh829.09 billion in the 2018/19 financial year and Sh718.32 billion in 2017/18 financial year.

“The increase was attributed to loans procured by the government and on-lent to Kenya Railways Corporation for the implementation of SGR. Consequently, KRC had the highest stock of undischarged government on-lent loans at Sh539.27 billion,” said Treasury in the report.

During the financial year to June 2020, the State paid debts on behalf of entities that are in distress and could not service some of the loans it guaranteed.

These included the State broadcaster KBC, the East African Portland Cement Company (EAPCC) and the Tana Athi River Development Authority (Tarda)

“During this period, the government paid Sh661.2 million as called up debts owed by the two public enterprise as follows – Sh365.4 million on behalf of EAPCC and Sh295.8 million on behalf of KBC,” said Treasury in the report.

Despite offsetting loans by State corporations guaranteed by government, the stock of loans continued grow as other State-owned entities continued to take up guaranteed debt.

While the government has in the recent years slowed down on guaranteeing any new loans by the parastatals, some may have taken more debt but within the limits already guaranteed by the State.

The State guaranteed loans went up to Sh160.45 billion in the year to June 2020 compared to Sh154.8 billion.

According to the Treasury report, only three firms are responsible for the stock of guaranteed debts – Kenya Electricity Generating Company (KenGen), Kenya Ports Authority (KPA) and Kenya Airways (KQ).

The three have in the recent years increased the amount of government guaranteed loans, with KPA nearly doubling this in three years to Sh39.37 billion in 2020 from Sh21.83 billion in 2017.

While KenGen reduced the amount of debt guaranteed by State substantially to Sh41.18 billion this year from Sh43 billion in June 2019, it has also grown substantially from Sh27.7 billion in 2017.

KQ’s publicly guaranteed debt stood at Sh79.89 billion as of June 2020, an increase from Sh76.7 billion in 2019.

Before then, it had slightly reduced from Sh77.78 in 2017. “The increase was mainly attributed to the drawdown of the guaranteed loans to KPA and Kenya Airways,” said Treasury in the report.