Why State is tightening screws on parastatals

 
The government has implemented measures to tackle the mounting pending bills, which reached KSh94.4 billion among targeted corporations as of March 2024, in a bid to streamline operations and improve fiscal discipline.
This effort includes reducing the number of state corporations from 271 to 222 through mergers, dissolutions, and divestitures involving 49 corporations.
The reforms aim to curb wasteful spending, enhance operations efficiency and address the ballooning public debt, which has placed significant strain on the economy.
According to a Cabinet dispatch, these measures were approved during its first meeting of 2025, held on 21 January in Kakamega county, following an assessment of state corporations by the National Treasury. The review excluded corporations slated for privatisation.
“State corporations have faced difficulties meeting their financial obligations, with many contributing to the accumulation of pending bills. By March 2024, these bills totalled KSh94.4 billion.ministries with a strengthened governance framework.”
Nine corporations will be dissolved, and their functions transferred to ministries or other entities. Six corporations will undergo restructuring to align with their core mandates, while 16 with outdated roles will either be divested or dissolved.
Additionally, four public funds classified as state corporations will be declassified and integrated into ministries, with strengthened governance frameworks.
“The State Corporations’ pending bills include payments due to contractors/projects, suppliers, unremitted statutory and other deductions, and pension arrears for Local Authorities Pension Trust,” the report reads.
These debts divert funds away from development projects, hindering economic growth.
For example, the Controller of Budget reported that as of 30 September 2024, state corporations and ministries accounted for KSh410.69 billion and KSh117.67 billion, respectively, of the KSh528.36 billion in pending bills.
Under the reform plan, 42 corporations with overlapping functions will be consolidated into 20 entities to eliminate redundancy.