The state turns to cash-able firms to fund operations

Feb 19th 2021- The government is turning to cash-rich firms and agencies to fund its operations following a drop in tax collections in Covid-19 pandemic economic fallout.

The Treasury has so far received a total of Sh14.8 billion from CBK and Sh2.7 billion Kenya Pipeline Company, and expects Sh6.3 billion from Safaricom next month, amounting its collections from the firms and agencies to Sh23.8 billion.

The lender CBK has now given the government a total of Sh14.8 billion since last year, including a Sh2.5 billion dividend on its results for the year ended June 2020 and Sh7.3 billion gained from the cancellation of the old Sh1,000 notes.

“The Central Bank of Kenya announces that on February 17, 2021, it transferred to the government Consolidated Fund Sh5 billion as an exceptional distribution from CBK’s General Reserve Fund in the current financial year 2020/21,” the banking industry regulator said in a statement.

Safaricom has joined the CBK in accelerating payouts to the cash-strapped government, with the telco announcing its first ever interim dividend of Sh18 billion or Sh0.45 per share. Their net profit in the half year ended September dropped six percent to Sh33 billion due to removal of fees on M-Pesa transactions of up to Sh1,000.

Tax revenue collection underperformed by Sh107.6 billion in the first six months of the financial year to December amid the coronavirus-related disruptions. The telco will pay the dividend on or about March 31 to shareholders on record as of March 5.

“This is in recognition of the company’s solid half-year performance and to support our shareholders during these difficult economic times occasioned by the Covid-19 pandemic,” Safaricom said in a statement.

The Treasury is one of the biggest beneficiaries of the surprise dividend announcement and will get a gross payout of Sh6.3 billion for its 35 percent stake in the country’s most profitable firm.

The CBK’s latest payment adds to the Sh7.3 billion that the institution gave to the government in March last year.

The amount represented the value of retired Sh1,000 notes that were not exchanged for new ones, rendering the cash invalid and hitting the suspected corrupt owners hard.

The CBK later approved a Sh2.5 billion dividend payout to the government when it published its results for the year ended June 2020, with the new payout raising its contributions to State coffers to Sh14.8 billion.

The interim dividend has accelerated payouts to shareholders who normally receive the cash distributions once in August or September. Safaricom is expected to announce a final dividend when it releases its results for the year ending March.

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