Bank loan

Cash-strapped Kenyan universities face closure under World Bank loan deal


Kenya has come under pressure from the World Bank to close and merge cash-strapped public universities and loss-making parastatals in what would see thousands of civil servants lose their jobs.

The multilateral financier believes that Kenya should merge tertiary institutions due to duplication of courses and the need to cut expenses.

The state-owned companies the bank wants to close have posted losses for three consecutive years.

Kenya has 102 public universities and campuses – which posted a shortfall of Ksh6.2 billion ($55.3 million) in the year to June and received almost Ksh70 billion ($624 million). $.9 million) from the Treasury to manage their operations.

The merger of universities and campuses as well as the revision of academic courses means that institutions should lay off some staff. Public universities have about 27,000 workers, including 9,000 lecturers.

The World Bank’s push to shut down universities and state-owned enterprises was revealed in an advisory to the government after the fund’s board approved multi-billion shilling loans to support the country’s budget and help the economy recover from the effects of the Covid-19 pandemic.


“Combating the proliferation of CS [State-owned companies] and streamline commercial and non-commercial SCs. For example, measures to address overlapping mandates and consolidate CSs in the education sector could improve the efficiency of public spending in higher education and reduce spending pressures,” the Bank said. world in the Kenya State Corporations Review.

“Accelerating the rationalization program for commercial SCs could help offset Treasury losses while increasing overall economic efficiency. (for example, the last three consecutive years).”

Public universities have struggled financially in recent years due to rapid expansion amid declining student enrollment.

They are expected to undergo reforms to reduce their costs in order to make them financially viable.

The number of public universities and campuses rose from 49 in 2010 to 204 in 2017 before falling to 102 last year.

Since 2016, several campuses have been closed across the country after declining student populations reduced the student population, hurting lucrative parallel degree programs in which students paid fees based on university rates. Marlet.

Universities have been hardest hit by the decline in the number of Kenya Certificate of Secondary Education examination candidates achieving the C+ grade and above required for university entrance, further straining their cash flow.

Students enrolling in the parallel studies program courses had over the years generated billions of shillings for the institutions.

Huge payroll

The shortage of cash in universities was also caused by the implementation of the Differentiated Unit Cost (DUC) model which led to a reduction in government capitation in major universities.

This caused a huge payroll gap and an accumulation of debt.

Universities that have closed some of their campuses are Kisii, Laikipia, Moi and Jomo Kenyatta University of Agriculture and Technology.

The World Bank is seeking to expedite the shutdown following losses reflected in the performance of top public universities.

The World Bank and the International Monetary Fund (IMF) should play a role in shaping policy that would force the government to put in place tough conditions in many sectors.

This comes on the back of their multi-billion shilling loan facilities in Kenya where money flows directly into the budget to supplement the public purse.

Under the administration of former President Mwai Kibaki, Kenya steered clear of this type of credit, with most funds coming from institutions such as the IMF and the World Bank in the form of support to projects.

The University of Nairobi (UoN) and Kenyatta University (KU) have plunged into a combined financial shortfall of Ksh4.3 billion ($38.3 million), highlighting cash flow issues that have led them to seek to raise tuition fees.

The Treasury revealed to Parliament last week that the UoN had a deficit of Ksh 2.17 billion ($19.3 million) in the year to June, compared to Ksh 1.62 billion ( $14.4 million) a year earlier.

KU’s deficit fell to Ksh 2.13 billion ($19 million) during the reporting period from Ksh 1.3 billion ($11.6 million) as the institution relied on short-term loans to finance its operations.

The latest revelations underscore the deep financial difficulties facing higher education institutions in the country.

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