City Hall, KBC bailout costs the taxpayer Sh4bn

Controller of Budget Agnes Odhiambo has proposed in her latest report that the Treasury should recover all the money it has paid out on behalf of agencies whose loans it guaranteed, but are not insolvent. FILE

By George Omondi

IN SUMMARY
The Controller of Budget’s report for the financial year ended June 2013 says the
government spent Sh3.93 billion to service debts that City Hall, KBC and Tarda owed various agencies and global financial institutions.

The Treasury spent nearly Sh4 billion of taxpayer funds to bail out underperforming State agencies last fiscal year even as it exceeded its own borrowing limits to plug huge budget holes, a new report on the state of public finance indicates.

The Controller of Budget’s report for the financial year ended June 2013 says the government spent Sh3.93 billion to service debts that the Nairobi City Council (NCC), the Kenya Broadcasting Corporation (KBC) and Tana and Athi River Development Authority (Tarda) owed various agencies and global financial institutions.

Some Sh656.5 million was drawn from the Consolidated Fund between April and June to meet what has become the Treasury’s annual obligation of servicing the 16 billion yen debt that KBC borrowed from Japanese Agency for International Development (JICA) in 1992.

The repayment, made in the fourth quarter of the 2012/13 financial year, brings the annual cost of servicing the KBC loan to the taxpayer to Sh1.3 billion.

“The money was paid on behalf of KBC which defaulted on its debt obligations for the period ending June 30, 2013,” the Controller of Budget Agnes Odhiambo says in her annual report.

The taxpayer carried an additional Sh1.62 million burden in the form of a fine imposed on the State in the first quarter of 2012/3 financial year for late payment of the KBC loan.

(READ: Taxpayers offset Sh1.6bn City Hall, KBC loan default)

The Treasury also stepped in to repay a loan that the defunct Nairobi City Council borrowed from USAid to build Umoja Estate more than three decades ago.

All the liabilities and assets the NCC have since been transferred to the Nairobi County government, arguably the richest county in Kenya.

Transfer of NCC’s assets to the county government did not, however, relieve the national government of the burden of paying Sh79.19 million to service the City Hall debt.

The loan that was guaranteed by the Treasury was to attract interest at an annual rate of 8.5 per cent.

The State also stepped in to aid Tana and Athi River Development Authority (Tarda) — now under the rural development department — which has also failed to repay money it borrowed from JICA.

The report shows that the taxpayer parted with a total of Sh526.3 million — in both principal repayment and interest — to service Tarda debt.

Mrs Odhiambo wants the Treasury to recover all the money it has paid out on behalf of agencies whose loans it guaranteed but are not insolvent.