By KENNEDY SENELWA, TEA Special Correspondent
In Summary
- A new rule introduced by the National Treasury to curb excessive borrowing also requires government ministries, state agencies and corporations to ensure their cashflow requirements are handled through a single Treasury account
Loans from domestic banks to Kenyan state corporations will not be ............................
guaranteed by the government.
guaranteed by the government.
A new rule introduced by the National Treasury to
curb excessive borrowing also requires government ministries, state
agencies and corporations to ensure their cashflow requirements are
handled through a single Treasury account.
The Treasury will only allow state corporations to
borrow money, either in the domestic or external market for investments
or projects that are commercially viable, and satisfy the rate of
return criteria.
National Treasury Cabinet Secretary Henry Rotich
said business plans have to demonstrate that an investment or project
will generate sufficient revenue to repay the loan in full without
recourse to the government for a bailout.
“Where interpretation in respect of terms and
conditions of outstanding loans to government or on-lent/guaranteed
loans by government is not clear, clarification should be sought from
the investment secretary,” said Mr Rotich.
Treasury releases budgetary allocations to
government agencies and corporations through the Exchequer when they
have surplus funds held in short term bank deposits invested in
Treasury-bills or bonds.
This has resulted in the country incurring huge
borrowing costs as a result of failure to synchronise national
government cashflow requirements (cash inflows versus cash outflows) to
ensure smooth budget execution.
To ensure proper cashflow management, circular
No.12/14 stipulates that requirements for ministries, departments and
agencies including state corporations must be conducted through the
Treasury Single Account.
Public institutions will now be required to
prepare and submit cash flow statements and projections on quarterly
basis, and also submit a schedule of investments of surplus funds held
in financial institutions and banks or in Treasury-bills and bonds.
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