Bank loan

Universities risk closure of World Bank loan deal


Economy

Universities risk closure of World Bank loan deal


Moi University in Eldoret. PHOTO FILE | NMG

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Summary

  • Thousands of people risk losing their jobs as part of the plan to merge struggling parastatals.
  • Public universities have come under financial pressure in recent years due to rapid expansion amid declining student enrollment.
  • The number of universities and public campuses increased from 49 in 2010 to 204 in 2017 before dropping to 102 last year.

Kenya has come under pressure from the World Bank to shut down 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 Kenya should merge higher education institutions due to duplication of courses and the need to cut spending.

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

Kenya has 102 public universities and campuses – which posted a deficit of 6.2 billion shillings through June and received nearly 70 billion shillings from the treasury to run their operations.

The merger of universities and campuses as well as the revision of university courses mean that institutions are expected to lay off some staff. Public universities employ around 27,000 workers, including 9,000 professors.

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

“Fighting against 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. global in the Kenya State Corporations Review.

“The acceleration of the commercial SC rationalization program could help fill the treasury losses while increasing overall economic efficiency. The focus could be on consistently underperforming SCs that have experienced persistent losses for an extended period (eg the last three years in a row). “

Public universities have come under financial pressure 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 universities and public campuses increased from 49 in 2010 to 204 in 2017 before dropping to 102 last year.

Since 2016, several campuses have been closed across the country after the lower entry level shrank the student body, negatively affecting lucrative parallel study programs in which students pay fees based on market rates.

Universities have been hit hardest by the drop in the number of Kenya Secondary School Certificate exam applicants achieving the C + grade and above required for university entry, further worsening their cash flow.

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

Huge payroll

The liquidity shortage at universities was also caused by the implementation of the Differentiated Unit Cost (CDU) model which resulted in a reduction in government capitation at large universities.

This has caused a huge payroll gap and a build-up of debt.

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

Le Monde is seeking to accelerate the closure following losses reflected in the performance of top public universities.

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

This is because of their multibillion shillings lending facilities in Kenya, where money flows directly into the budget to supplement public funds.

Under the administration of former President Mwai Kibaki, Kenya has stayed away from this type of credit, with most funds from institutions like the IMF and the World Bank coming in the form of project support. .

The University of Nairobi (UoN) and Kenyatta University plunged into a combined financial deficit of 4.3 billion shillings, highlighting cash flow problems that led them to seek higher tuition fees.

The Treasury revealed to parliament last week that the UoN had a deficit of 2.17 billion shillings through June, down from 1.62 billion shillings a year earlier.

KU’s deficit fell to 2.13 billion shillings during the period under review from 1.3 billion shillings as the institution relied on short-term loans to finance its operations.

The latest revelations highlight the deep financial difficulties facing the country’s higher education institutions.

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