Privatizing state-owned businesses might generate Sh30 billion in annual revenue, the Parliamentary Budget Office (PBO) has said.
According to PBO’s assessment, the government might reduce debt vulnerabilities by closing state-owned businesses that are losing money.
PBO said in a report dubbed, “Fiscal Consolidation amid a Global Recession, what is the magic?” that 47.9 percent of revenue collected is used to service debts.
“This leaves only 52.1 percent of the tax revenue to finance an ambitious government development programme in an economy experiencing a high budget deficit that requires further borrowing in a recessionary global environment,” the report shows.
Read: New Privatization Bill Excludes Parliament from Approving Sale of Parastatals
PBO stated that the government must create a strategy for a sustainable privatization process that tackles ongoing issues, such as repealing the Privatization Act of 2005.
“Privatisation programme is implemented along with a strategy of improving the financial status of State Owned Enterprises to derive long-term benefits,” PBO said.
According to the report, in order to have a long-term impact, privatization funds should be allocated to capital projects that could provide future revenues or be used to pay down high-interest public debt.
In January, National Treasury proposed measures that will bar Parliament from having a say in the sale of State-owned businesses.
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The Privatization Bill will give Treasury more authority over the sale of parastatals as the new administration attempts to sell a huge chunk of government-owned businesses.
The Bill proposes that the board of the Privatization Authority, which is presently the Privatization Commission, and the Cabinet Secretary for National Treasury will both authorize the sale of State-owned businesses.
But according to the Privatization Act 2005, which is set to be repealed, a report on a privatization proposal approved by the Cabinet must be sent to the National Assembly in the form of a sessional paper.
However, under the new proposals, Treasury Cabinet Secretary will assume responsibility for the privatization process, including choosing which firms to include in the program.
“Upon preparation of a privatization proposal, the proposal shall be approved by the Board with the concurrence of the Cabinet Secretary,” reads the draft Privatization Bill.
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