Economist David Ndii painted a gloomy picture of what he termed to be the future of parastatals after the acting Treasury CS Ukur Yattani ordered them to surrender surplus cash.
Ndii took to Twitter to react to the order by breaking down how it would affect the financial strengths of the state corporations.
"So State House has ordered parastatals to hand over all their cash reserves, treasury bills/bonds and even A-in-A revenue (i.e what they earn in service fees) to the Treasury. What are the implications?" Ndii tweeted.
He then went on to claim that the move was set to impair the cash flow of these state corporations and in turn, affect operation and service delivery of the same.
"The state corporations which have had their own resources will now have to depend on the notoriously unreliable and unpredictable exchequer releases," explained the economist.
Ndii, who doubles up as an activist claimed that despite the memo suggesting that some of the money would be used to settle pending bills, it would just transfer the same pending bills to the parastatals whose suppliers would be at the mercy of the exchequer.
"Expect some parastatals to default on their suppliers in coming days," he went on.
Ndii further alleged that the biggest cause of the financial crisis the government was facing was foreign debt and thus, a significant amount of the surplus parastatal cash would be used to pay them, therefore, draining the economy.
"Part of the money confiscated from parastatals is going to pay the foreign debt. Instead of circulating in the economy, it is going to China. Another body blow to an already battered economy,
"The confiscation of treasury bills/bonds is for all intents of purposes, a default action. It does not matter that these are state corporations, these debt instruments backed by law, and the government/debtor has suspended the law. It’s a case of might is right, impunity," Ndii stated.
He concluded his analysis by claiming it was just but the beginning, as the government hunger for more funds was insatiable and would then target other institutions.
"When it gets more desperate as it will, what will stop it doing the same to other vulnerable investors eg. public pension funds? By resorting to such a draconian action, it has exposed that its more distressed than its been letting on. Expect investors to take note," Ndii concluded.
According to The Standard, among the firms that have so far remitted huge dividends are the Kenya Pipeline Company (KPC), which has returned Ksh5 billion, and the Kenya Airports Authority (KAA) that remitted Ksh12 billion.
