Ruto Orders Commercial Parastatals to Remit 80pc of Net Profit to Treasury
President William Ruto has ordered that every commercial state corporation must transfer 80 percent of their profits after taxes to the National Treasury.
The president cautioned that all government entities running deficits must be closed within three years as he is resolutely striving to attain a balanced budget.
“We will give you instructions on what to do with the other 20 percent,” he stated.
Addressing a gathering of parastatal leaders and CEOs of state corporations at State House Nairobi on Tuesday, March 26, President Ruto additionally directed regulatory bodies to transfer 90% of their excess 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 technology to maximize 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 confirmed that state-owned enterprises need to halt unnecessary spending, which includes funding excessive benefits in their parent departments and unnecessary purchasing.
Created in accordance with the State Corporations Act, state entities encompass entities such as the Central Bank of Kenya, Kenya Revenue Authority, Insurance Regulatory Authority, Competition Authority of Kenya, Retirement Benefits Authority, and various others.
For quite some time, there has been ongoing debate regarding whether Kenyans are receiving adequate value for the money invested in these establishments.
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According to the 2020/2021 Consolidated Government Report, state corporations generated Ksh677,932 million internally, whereas the total transfers and subsidies to these corporations amounted to Ksh377,990 million during the same period.
In the same year, state-owned companies saw a significant rise in profits, reaching Ksh37,328 million compared to a loss of Ksh9,542 million previously.
Ruto instructed that moving forward, government budgets and spending undergo thorough examination to cut costs and halt unnecessary borrowing.
As of June 30, 2021, the loans to state corporations totaled Ksh1,236,337 million, with government loans comprising Ksh944,511 million of the total.
In the previous year, Prime Cabinet Secretary Musalia Mudavadi encouraged State Corporation Board members to strive for profitability in their organizations, warning that failure to do so could result in privatization.
“Currently, we have 79 State Corporations that are commercial. 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. Over 40% of the commercial state corporations turn to the exchequer for financial subsidy.”
Deputy President Rigathi Gachagua and PCS Musalia Mudavadi were also in attendance at the meeting discussing budget reductions and the proposed privatization of certain institutions.
Ruto Orders Commercial Parastatals to Remit 80pc of Net Profit to Treasury