President William Ruto has directed all commercial state corporations to remit 80 per cent of their profits after tax to the National Treasury.
The president threatened to close all loss-making government institutions in three years as he pushes full steam ahead toward a balanced budget.
"We will give you instructions on what to do with the other 20 per cent," he stated.
Speaking during a meeting with parastatal heads and CEOs of state corporations at State House Nairobi on Tuesday, March 26, President Ruto also ordered regulatory institutions to remit 90% of their surplus funds to the Treasury.
President Ruto stated, “Our budgets and expenditures must be subjected to rigorous audit to eliminate abuse of public resources. We will leverage on technology to maximise on the value for money and boost service delivery.”
In a renewed effort to increase government revenues, President Ruto stated, “The time is up for loss-making parastatals.”
The president affirmed that state corporations must stop wasteful expenditure, including financing largesse in their parent ministries and unnecessary procurement.
Established under the State Corporations Act, state corporations include; the Central Bank of Kenya, Kenya Revenue Authority, Insurance Regulatory Authority, the Competition Authority of Kenya, and the Retirement Benefits Authority among others.
These institutions have for long been a bone of contention on whether or not Kenyans are getting value for money.
In the Consolidated Government Report 2020/2021, internally generated funds by state corporations stood at Ksh677,932 million, while the total transfers and subsidies to state corporations in the same year stood at Ksh377,990 million.
During the same year, profits declared by state corporations increased by a big margin to Ksh37,328 million from a loss of Ksh9,542 million.
Ruto directed that, from now on, government budgets and expenditures be subjected to rigorous scrutiny to reduce expenditure and stop unnecessary borrowing.
The total loans to state corporations stood at Ksh1,236,337 million as of June 30, 2021, of which total government loans amounted to Kshs.944,511 million.
Last year, the Prime Cabinet Secretary Musalia Mudavadi urged members of Boards of State Corporations to work and turn their corporations to profitability or face privatization.
“Currently, we have 79 State Corporations that are commercial in nature. Although these agencies have some strategic objectives, their main reason for existence is “for-profit”. They are meant to be a source of revenue for the Government through dividends to the National Treasury,” stated Mudavadi.
He added, “Unfortunately, only about 5% of the 79 Agencies pay any such dividends. In fact, over 40% of the commercial state corporations turn to the exchequer for financial subsidy.”
Also present at the meeting on budget cuts and planned privatization of some institutions were Deputy President Rigathi Gachagua and PCS Musalia Mudavadi.
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