The volume of state-guaranteed debt has dropped to KES 83.2 billion, reflecting a tighter grip by Treasury on parastatal borrowing, even as risks linger.

In a rare flicker of positive fiscal news, the National Treasury has reported a significant drop in the stock of publicly guaranteed debt, which now stands at KES 83.2 billion. This represents a 17% decline from the KES 100.2 billion recorded the previous year, signaling a successful clampdown on reckless borrowing by State-Owned Enterprises (SOEs).

The reduction is not accidental. It is the result of a deliberate freeze on new guarantees and the scheduled repayment of existing loans by strategic entities. However, the Treasury remains on high alert, flagging the remaining portfolio as a potential fiscal landmine.

The Usual Suspects

The guaranteed debt is concentrated in three strategic giants: Kenya Ports Authority (KPA), Kenya Electricity Generating Company (KenGen), and the troubled national carrier, Kenya Airways (KQ). These entities hold the keys to Kenya’s infrastructure, but their balance sheets have often required the taxpayer to act as a shock absorber.

• KenGen & KPA: Largely servicing their obligations for massive infrastructure projects like geothermal plants and port expansion.
• Kenya Airways: Remains the volatile element, with past defaults having forced the Treasury to assume repayment responsibilities directly.
• The Strategy: Treasury has stopped issuing new guarantees, forcing parastatals to clean up their books or seek non-sovereign financing.

The Contingent Liability Risk

Despite the drop, these guarantees are classified as "contingent liabilities." If any of these firms default, the debt instantly migrates to the national exchequer, worsening the already high budget deficit. The Treasury’s "Draft Medium-Term Debt Management Strategy" explicitly warns that oversight on these firms must be draconian to prevent a surprise shock.

A New Era of Discipline?

The reduction to KES 83 billion suggests that the era of "easy money" for parastatals is over. The government is forcing these entities to operate like businesses rather than departments of the ministry. While the debt stock is falling, the true test will be whether these firms can maintain profitability in a high-interest rate environment without running back to the parent—the State—for a bailout.