The Treasury has warned that the bulk of commercial loans debt-laden public universities hold are costly overdrafts that could pose a financial burden on taxpayers if they are not serviced.
The Treasury says disclosures made by eight universities for the period ended June 2023 show that the outstanding debts to local commercial banks amounted to Sh4.88 billion.
That represented 61 percent of Sh8.04 billion in bank loans contracted by the universities without the Treasury’s guarantee.
Jomo Kenyatta University of Agriculture & Technology controlled half of the loans, but which “pose a contingent liability risk and potential fiscal commitment to the national government”.
“Education sector debt stood at between one and two percent of total debt, with a significant portion of non-guaranteed debt held by universities as overdraft facilities,” the Treasury wrote in the Annual Public Debt Management report for the year ended June 2023.
JKUAT held an outstanding commercial loan of nearly Sh2.47 billion, the data shows, representing 55 percent of the nearly Sh4.45 billion it borrowed in one facility.
It was followed by Kenyatta University which owed two commercial banks slightly more than Sh1.02 billion, or 67.34 percent, of the Sh1.52 billion it took out.
The University of Nairobi had Sh527 million outstanding out of Sh950 million in non-guaranteed commercial loans.
Maseno University had cleared a marginal Sh12.5 million out of Sh500.4 million as of June, while the Kericho-based University of Kabianga owed Sh148.8 million out of Sh300 million non-guaranteed loan it took out.
Others are cash-strapped Egerton University which was yet to start servicing a Sh100 million loan facility; Jaramogi Oginga Odinga University (Sh96.7 million out of Sh174 million loan), and Taita Taveta University (Sh29.7 million out of Sh50 million facility).
The non-guaranteed loans are from universities that made disclosures to the Treasury in the review period.
Overall, universities had more than Sh61 billion in debts owed to the Kenya Revenue Authority, pension schemes, insurers, saccos, and workers as of May 2023, according to earlier Higher Education depart disclosures.
