If approved, the write-offs requests by State firms would transfer the financial burden to taxpayers.
State firms are seeking to write off about Sh28.55 billion in loans after years of defaults, effectively transferring the financial burden to taxpayers.
Treasury’s Government Investment and Public Enterprises annual report for the year to June 2025 shows that the write-off requests submitted to the Cabinet form part of Sh511.44 billion in principal and accrued interest on earlier loans.
The breakdown of outstanding loans shows that at least 29 State-owned enterprises have applied for the write-off. If approved, the write-offs would transfer the financial burden to taxpayers, as the loans from the Treasury to such entities are usually drawn from public coffers.
Top applicants for the write-offs related to historical loans that have been in default status for years include Nairobi City Council (Sh14.71 billion), National Water Conservation (Sh5.44 billion), Agro-Chemical &Food Co Ltd (Sh2.94 billion), Lake Basin Development Authority (Sh1.34 billion) and Catering Levy Trustees together with Utalii College (Sh733.27 million).
“During the financial year, a request for loan write off was submitted to Cabinet, which relates to historical loans that seem unrecoverable,” reads the annual report in part.
The loans set for write-off, subject to Treasury’s approval, came in a period when principal and interest arrears rose from Sh405.11 billion, indicating rising default levels among State-owned enterprises. Requests for write-offs amounting to Sh7.87 billion relate to seven defunct entities, with the bulk of it related to the Local Government Loans Authority (Sh7.59 billion).
Revenue challenges
Also included on the list of loans where write-offs have been sought are Kenya Meat Commission (Sh338 million), National Irrigation Board (Sh387.62 million), Local Government Authorities (Sh848.11 million) and Moi University (Sh231.25 million).
The requests for loan write-offs and surging defaults saw Treasury net Sh85.6 billion revenue from State entities in the form of dividends, loan redemption and interest payments and directors' fees. The collections were below the targeted Sh109.55 billion but a rise from Sh56.91 billion netted in the previous year.
Besides the potential write-offs, the report also shows several other entities that are struggling to keep up with the repayments.
The Auditor-General report accompanying the annual report shows that 80.8 per cent or Sh413.35 billion loan arrears relate to Kenya Railways Corporations loan towards the Standard Gauge Railway project. The audit shows the SGR loan is due but Kenya Railways is yet to start servicing it.
The Treasury has indicated that the corporation was served with a demand letter.
“The Corporation is yet to start repaying the loan. Demand letter has been issued to request the entity to repay the loan,” said the annual report on the status of the loan.
The audit showed the water sector also contributed an additional Sh44.98 billion extra loans in arrears on the back of revenue challenges occasioned by changes in law governing the sector.
For instance, Athi Water Works Development Agency, Tanathi Water Works Development Agency and Coast Water Works Development Agency have defaulted on loans worth Sh10.53 billion, Sh1.58 billion and Sh5.99 billion, respectively.
The report shows the Treasury and Water ministry are still weighing the policy direction to guide the water loans, with several other agencies in this sector only servicing their loans partially.
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