Despite the Kenyan government grappling with financial constraints, state-owned corporations have amassed billions of shillings sitting idle in commercial bank accounts. In a startling revelation, the National Treasury has disclosed that as of June 30, 2023, these entities collectively held a staggering Ksh 431.7 billion deposited across various financial institutions.
Speaking during the presentation of the Budget Statement in Parliament, Treasury Cabinet Secretary Prof Njuguna Ndung’u decried this situation, emphasizing that the government was unable to access these substantial funds at a time when it was facing cash shortages. “These large cash balances were not immediately accessible at a time when the government was cash-strained,” he stated.
The Treasury is now eyeing these funds through ongoing reforms targeting state corporations. To gain control over these resources, the government is implementing the Treasury Single Account (TSA) System, which consolidates government cash resources into a single account held at the Central Bank and sub-accounts at commercial banks.
Prof Ndung’u announced that the migration to the TSA system will commence on July 1, 2024, with the establishment of a dedicated Treasury Function to manage the accounts’ structure, ensuring transparency and efficiency in public finance management.
Access to these idle funds could potentially reduce the government’s borrowing needs. For the 2024-25 financial year, the government plans to borrow Ksh 597 billion to bridge the gap between the Ksh 3.99 trillion total budget and the Ksh 3.34 trillion in expected revenues.
The move to consolidate state corporations’ funds is part of broader reforms aimed at enhancing the performance and accountability of these entities. The government recently unveiled a privatization program, which is expected to see about 40 entities sold to private sector players, while others will be restructured through mergers or transferred back to parent ministries.
The State corporation reforms are backed by the International Monetary Fund (IMF) as a condition for continued access to its loans. The IMF has highlighted the need for these reforms, noting that state corporations and semi-autonomous government agencies manage a substantial portion of public sector assets but contribute very little to the budget through dividends and taxes.
As the government seeks to address its financial challenges and enhance transparency, the consolidation of state corporations’ funds and the ongoing reforms are expected to play a crucial role in improving fiscal discipline and streamlining the management of public resources.