Parastatals to feel the pinch with 30% budget cuts
With mounting pressure to curb extravagant spending in his administration, President Ruto has ordered CEOs of State Corporations to slash their recurring expenditures by 30 percent. Data shows that State Owned Enterprises received Kes365.7 billion in the FY2022/23, meaning that Dr Ruto’s push for a 30 percent cut would is set to see a Kes109.72 billion squeeze on the operations of parastatals.
Commercial State corporations have also not been spared as they have been ordered to start remitting 80 per cent of their net profits to the National Treasury. “We will give you directions on what to do with the remaining 20 percent,” Dr Ruto added.
Commercial state corporations
Some of the outstanding Commercial State corporations are utility Kenya Power, Kenya Ports Authority, KenGen, and the Kenya Pipeline Company. In the FY ended December 2023, electricity distributor Kenya Power swung from losses to post Kes319 million net profit while Kengen recorded Kes2.96 billion in earnings.
At the moment, Kenya Pipeline is set to pay the National Treasury Kes5 billion in special dividends for the FY ending June 2023. On its part, the Kenya Airports Authority had Kes281.58 million surplus in FY2022/23 while the Kenya Ports Authority closed FY2022/23 with Kes 11.99 billion in surplus.
While noting that the time for loss-making parastatals is over, Dr Ruto further asked regulatory institutions such as the Central Bank of Kenya to start remitting 90 percent of their surplus finances to the National Treasury. “There will be no exceptions. Everybody must comply.”
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Economy has stabilised
Speaking to chairs and CEOs of State Corporations, Dr Ruto said, “Now that the economy has stabilised, we cannot continue accumulating debt. Borrowing will only lead us down the cliff,” he added.
On wastage in parastatals, the President warned, “The money some parastatals make does not belong to their boards or management. It belongs to the people of Kenya as returns on investment.”
Dr Ruto noted that the abuse of public resources has become so rampant in government and it is continually hurting the delivery of services. “We will also leverage technology to check on improper payments and maximise on the value for money,” he asserted.
Additionally, the President noted that his administration will carry out consolidation to eliminate duplication of functions, wastage as well as the closure of loss-making entities, noting that “we must end excess capacity.”
