GBR Team 21/11/2019
Kenya Treasury bosses will be steaming after the nation’s reserve bank voted to put Sh15billion out of their reach when remitting its annual profits to the national coffers.
Instead, the Board of the Central Bank of Kenya elected to send Sh4bn to the Consolidated Fund, while setting aside a surplus Sh15bn to fund its operations for the year including printing of new bank notes and beefing up its balance sheet to resist financial shocks.
A cash-hungry National Treasury has in recent weeks raided state corporations for excess funds as it battles to fund government projects with dwindled resources.
For the CBK, the net profit after provisions and expenses, is deposited into a General Reserve Fund from where it is supposed to be remitted to the Consolidated Fund. The Fund is the national bank account from which government budget appropriations are made.
“The CBK on 16 September 2019 transferred to the Consolidated Fund Sh4bn as distribution from the General Reserve Fund as at end of FY 2018/19,” the Bank said in a press statement dated 21 November.
Concurrently, CBK said it transferred Sh15bn from the GRF towards increasing its paid-up share capital to Sh35bn up from Sh20bn previously.
“In this the CBK Board also considered CBK’s financial needs to deliver on its mandate.”
It listed among these priorities the need to modernize facilities and infrastructure, the printing of new generation notes expected to cost up to Sh15bn, and growing its balance sheet to endure financial turbulence.”
Treasury Cabinet Secretary Ukuru Yattani has said he expects to raise Sh131bn from Ministerial budget cuts and State Corporations who have to remit 90 per cent of their operating surplus cash/dividends.
So far, reports indicate that the Kenya Ports Authority has remitted Sh18.7bn, Kenya Revenue Authority Sh6bn, Kenya Pipeline Corporation Sh5bn, with the Kenya Airports Authority expected to wire Sh12bn.
The CBK move effectively denies Treasury a windfall of close to Sh20bn it could have collected from the reserve body to add to the Sh33bn it has already collected from other regulators in recent weeks.
CBK will appear to have been guided by three sections of its establishing Central Bank of Kenya Act (Cap 491) in making its decision.
Section 8(1) allows the Board to increase its capital in consultation with the minister. According to the statement, an increase of its authorised share capital to Sh50bn has been in effect since June 2019.
Section 8(2) allows the Board to allocate any surplus of assets over its liabilities to increase its paid-up share capital by the same amount.
Section 9 allows for the Bank to expense for its operations when calculating the money to remit to the GRF.
Section 50 allows the Bank to advice the Minister of any issues likely to affect its ability to deliver on its mandate.