The Central Bank of Kenya has released data indicating growth of the non-performing loans for the period December 2022 to the end of April 2023 of 14.9% from 13.3% recorded in December 2022, which translates to an increase of Ksh 82.9 bn to Ksh 570.6 bn at the end April from Ksh 487.7 bn in December 2022, which was broadly attributed to the unfavourable business environment and the national government’s huge pending bills to contractors, which has, in turn, incapacitated them from repaying the acquired loans. The non-performing loan ratio measures the rate of unserviced loans for three consecutive months.
The national government’s pending bills were billed at Ksh 641.0 billion at the end of May 2023, with a representation of Ksh 407 billion owed to suppliers and contractors, Ksh 160 billion to county governments, and Ksh 18.3 billion to ministries and departments.
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The continued rise in pending bills has increased the non-performing loan ratio since most contractors use bank facilities to carry out government contracts and supplies. In addition, many small and medium-sized businesses have run into financial crises due to the delay in government payments by both national and county governments, coupled with tight business and economic conditions.
The Treasury has been struggling to settle payments to suppliers in time, which saw the issuing of the 7-year infrastructure bond that recorded an oversubscription rate of 367.5% to attract a total of Ksh 220.5 bn in investor bids against a target of Ksh 60 bn. This, coupled with USD 1.0 billion in financing from the World Bank in early June, is expected to narrow down the pending bills and, in turn, reduce the non-performing loan ratio.
