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{
"id": 188934,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/188934/?format=api",
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"type": "speech",
"speaker_name": "Mr. Michuki",
"speaker_title": "The Minister for Environment and Mineral Resources",
"speaker": {
"id": 183,
"legal_name": "John Njoroge Michuki",
"slug": "john-michuki"
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"content": "Mr. Speaker, Sir, I was saying that the Government initiated loans of about Kshs20 billion extended by the National Bank of Kenya (NBK). In particular, the hon. Member also wanted to know from the Minister as follows: \"Clarify first the issue of why the loans borrowed by private companies and individuals should be paid by the Government. These are companies of people who are known. They have ability to repay.\" Mr. Speaker, Sir, I wish to put the record straight on the issues raised by providing an appropriate historical context of the subject matter. The NBK started operations in 1968 as a wholly Government-owned bank. Over the years, Government interference in its management and credit provision led to a large stock of non-performing loans and huge financial losses. As a result, in 1993, and later in 1998, the NBK was on the verge of collapsing, but the Government intervened and injected fresh liquidity. Delays in taking bold action by the Government led to NBK's non-performing loans rise to a colossal sum of Kshs20 billion by the end of the year 2006, before restructuring action was taken. If no action would have been taken, the amount owed to NBK by the Government would have escalated further to Kshs24.6 billion by the end of last year, and to Kshs30.3 billion by the end of this year. Mr. Speaker, Sir, I take it that when Mr. Okemo was the Minister for Finance, he must have been aware of the difficulties the bank was going through since he issued a letter to the bank's external auditors to ensure that its annual accounts were not qualified. Such letters have since been issued annually by the successive Ministers for Finance. So, what we did is not unusual. A vibrant, efficient and stable financial sector is critical for a sustainable economic development and growth, and also in poverty reduction campaign. Therefore, addressing the NBK's non-performing loans problem, once and for all, before it got completely out of control, was a priority ofthe Government. In this regard, in May, 2006, the Cabinet approved the proposal by the Treasury to restructure the NBK and issuance of non-negotiable special bonds to the NBK. Mr. Speaker, Sir, the approach of using de-capitalization bonds for financial restructuring of the NBK was informed by similar actions taken in many other countries. Following the Cabinet approval, the Treasury, subsequently, appointed a committee to implement this decision. The committee had membership from the Ministry of Finance, the Central Bank of Kenya (CBK) and the State Law Office. That is the Attorney-General's office. To ensure that the non-performing loans dealt with were, indeed, only those initiated by the Government, the Treasury, in November, 2006, requested the Controller and Auditor-General to carry out the necessary audit. The Controller and Auditor-General responded and appointed"
}