State corporations have been ordered to surrender cash balances in their bank accounts to the treasury.
This follows a meeting held last week between the Treasury and the parastatal heads, meant to negotiate how much they should surrender in order to reduce government’s cost of borrowing.
“It has happened in the past but it has not been targeting all State corporations as it is happening now. It’s only that we want to be more formal how we do it this time round in a more orderly way. If they got surplus money they pay back and that would be taken back in accounting what is called the retained earnings and that is quite in order,” said Treasury principal secretary Julius Muia in an interview.
According to reports by Business Daily, over 10 parastatals are holding more than Ksh100 million.
However, the move could see some operations of the bodies crippled or maybe destroying their relations with banks where they borrow.
It is reported that some banks are already questioning the move, despite Dr Muia assuring that the money will not be drawn arbitrarily, but will be discussed with each State corporation depending on their balance sheets.
“We’re not doing it without consultation, we’re looking at their balance sheets, projected requirements going forward and how much of their surplus funds will be remitted to the Treasury. So it is a very orderly way in which we are doing it,” said Dr Muia.
Normally, the Treasury banks with the Central Bank of Kenya (CBK) hence the move will see large chunks of money withdrawn from the commercial banks.