At least 29 state corporations asked the Cabinet to wipe away Sh28.55 billion in long-standing loans owed to the Treasury. The agencies argue that these debts have clogged their books for years, and current financial struggles make repayment highly unlikely.
According to the Treasury’s Government Investment and Public Enterprises annual report for the year ending June 2025, these write-off requests represent just a fraction of a much larger crisis. In total, state corporations owe a massive debt stock of Sh511.44 billion in principal and accrued interest from earlier loans.
The report indicates that the 29 applicants are targeting historical loans that have languished in default for years and are now viewed as largely uncollectable.
“During the financial year, a request for loan write-off was submitted to Cabinet, which relates to historical loans that seem unrecoverable,” the report reads.
If the Cabinet approves the requests, the financial burden will fall squarely on taxpayers’ shoulders, since the Treasury initially drew these loans to state-owned enterprises directly from public coffers.
Nairobi City Council leads the pack of struggling entities, lobbying for a massive Sh14.71 billion write-off. Other heavy hitters on the list include:
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National Water Conservation: Sh5.44 billion
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Agro-Chemical & Food Co Ltd: Sh2.94 billion
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Lake Basin Development Authority: Sh1.34 billion
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Local Government Authorities: Sh848.11 million
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Catering Levy Trustees and Utalii College: Sh733.27 million
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National Irrigation Board: Sh387.62 million
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Kenya Meat Commission: Sh338 million
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Moi University: Sh231.25 million
The Treasury report further reveals that Sh7.87 billion of the requested write-offs belong to seven defunct entities, with the long-dead Local Government Loans Authority accounting for the lion’s share at Sh7.59 billion.
At the same time, official data highlights a severe repayment strain across the public sector. Total principal and interest arrears have skyrocketed from Sh405.11 billion to Sh511.44 billion, signaling a worsening wave of defaults among Kenya’s state corporations.
Despite the rising defaults and write-off requests, the Treasury still pulled in Sh85.6 billion in revenue from state entities through dividends, loan repayments, interest payments, and directors’ fees. While this marked a solid jump from the previous year’s Sh56.91 billion, it still fell short of the government’s Sh109.55 billion target.
The Auditor General’s report accompanying the Treasury document highlights that Kenya Railways Corporation holds a staggering 80.8 percent of the total debt, accounting for Sh413.35 billion in loan arrears linked to the Standard Gauge Railway project.
“The corporation is yet to start repaying the loan. “A demand letter has been issued to request the entity to repay the loan,” the report reads.
The audit further reveals that the water sector is buckling under heavy financial strain, racking up an additional Sh44.98 billion in loan arrears. The report attributes these defaults to severe revenue challenges sparked by shifting sector regulations. The main defaulters in this space include:
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Athi Water Works Development Agency: Sh10.53 billion
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Coast Water Works Development Agency: Sh5.99 billion
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Tanathi Water Works Development Agency: Sh1.58 billion
The report notes that the Treasury and the Ministry of Water are still trying to hammer out a policy direction to manage these water sector loans, as several agencies continue to make only partial payments on their debts.
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