Kenya seen raising more than $800m from asset sales
Kenya can raise as much as 110 billion shillings ($878.5 million) by selling stakes in state-owned companies to help reduce its fiscal deficit, according to the East African nation’s Parliamentary Budget Office.
The sales could generate about 30 billion shillings annually in the medium term, depending on the method of the asset sales, targeted companies and response from potential buyers, the PBO said in a report posted on its website.
President William Ruto directed his administration to urgently prepare to sell stakes in some of the nation’s 248 corporations, with a view of reducing the burden of providing bailouts to companies in distress. The income generated will also help the government’s plan to reduce the budget deficit to 4.3% of GDP in the year beginning July, from an estimated 5.8% in the current period.
Kenya can use the program, which could raise an equivalent of 1% of the nation’s GDP, as a “short-term fiscal consolidation strategy,” according the PBO report. “It is estimated that the privatization program will primarily target commercial enterprises that account for 19% of total state corporations” while the others “could be undertaken on a case-by-case basis.”
The National Treasury proposed to repeal Kenya’s privatization law, to pave the way for rules that can fast-track the process of selling public entities. Ruto’s plan further involves using the proceeds to set up an infrastructure bank and use it to finance commercially viable capital projects, instead of solely using tax income in the budget for such expenditure.
The Kenyan Treasury’s exposure in state-owned companies, partly in loans and potential bailouts, amounted to 1.3 trillion shillings as at the end June 2022, according to the PBO. “To avoid future nationalization, the privatization program should be implemented alongside a strategy aimed at improving the financial sustainability” of the firms.
Some of the companies the government fully owns or has significant stakes in include, Kenya Airways Plc, Kenya Electricity Generating Co., Kenya Pipeline Co. and Kenya Ports Authority. Ruto said in December that his government is prepared to sell its entire stake in its flag-bearing airline.
