Kenya Treasury terms banks’ data on state accounts ‘insincere’

The National Treasury building in Nairobi, Kenya.

Photo credit: Dennis Onsongo| Nation Media Group

Kenya’s National Treasury has raised concerns about data submitted by commercial banks regarding the status of government accounts, accusing the lenders of “insincerity.”

The government had previously restricted its accounts in commercial banks as part of a broader plan to reduce the loss of public funds and transition to a Treasury Single Account (TSA).

However, reliable sources told The EastAfrican that data from the banks indicated the number of national government accounts to be fewer than 22,000 - significantly below the Treasury’s estimate of approximately 190,000.

“We have a three-year roadmap for the Treasury Single Account, so getting an accurate inventory of bank accounts is crucial to ensure we don’t lose money,” a source, who requested anonymity, said.

“If we declare that these (22,000 accounts) are the only ones we know, we risk losing significant sums. We estimate there should be more than 190,000 accounts, but the banks’ submission shows fewer than 22,000. This is not data we can rely on.”

The source added: “Based on the institutions and financial statements available to us, we believe the figure is closer to 190,000. We aim to reconcile this by starting with the known accounts, confronting the banks with our data, and ensuring we get more reliable figures. For example, there are approximately 33,000 schools alone. We need to capture all that data.”

The EastAfrican understands that the Treasury plans to write to commercial banks again in February, demanding they provide accurate details on the number and value of government accounts.

“We will give them one month to respond. Since the banks are automated, we don’t expect significant challenges. However, some aspects are complex. It’s a time-consuming exercise, but we want to do it right,” the source explained.

The Kenya Bankers Association (KBA) stated in April 2024 that discussions had begun with the Treasury and the Central Bank of Kenya to ensure the TSA’s implementation does not disrupt operations for banks or state agencies.

KBA CEO Raimond Molenje did not respond to calls or text messages from The EastAfrican by the time of publication.

The association supports a phased implementation of the TSA and has proposed a decentralised or hybrid model that allows ministries, departments, and agencies to maintain commercial bank accounts linked to a central account.

In April 2024, the Treasury commissioned a baseline survey to determine details of government accounts held in commercial banks. This data would inform decisions on consolidating public funds into a single account. The Treasury initially demanded details from banks about the number, identity, type, and value of government accounts to expedite this process.

The findings of the survey are expected to guide the Treasury in balancing stakeholder concerns and avoiding unintended consequences. Disclosures about government account balances are critical to improving oversight and reducing idle cash.

Currently, Tier 1 banks hold the majority of public funds and are likely to face the greatest impact from potential deposit withdrawals. While state corporations and semi-autonomous government agencies typically bank with commercial institutions, ministries, departments, agencies, and counties maintain accounts with the Central Bank of Kenya.

To prevent a liquidity crisis, the Treasury announced in November 2024 that it would not immediately move government deposits from commercial banks during the initial TSA implementation phase.

“As the Treasury, we are sensitive to the liquidity dynamics of the banking system. We won’t undertake abrupt balance withdrawals. Instead, we aim to progressively improve how we manage government accounts,” said Jonah Wala, the National Treasury’s Director of Accounting Services.

“Initially, the focus will be on gaining visibility due to the liquidity concerns. Over time, both the banking system and the Treasury will adjust to the TSA.”

Under the visibility concept, the Treasury will enhance its oversight of government accounts in commercial banks, aiming to reduce idle cash.

The Treasury’s supplementary estimates for the 2023/2024 fiscal year indicate that the government has adopted a hybrid TSA model. Ministries and state departments will operate accounts at the Central Bank, while state corporations’ accounts will remain with commercial banks, provided they do not hold idle cash.

Banks have expressed concerns about the cost implications of the TSA, including upgrading their systems to enable real-time account linkages for seamless payments and monitoring.

The move towards a TSA aligns with efforts by East African Community (EAC) partner states, which agreed in 2018 to consolidate accounts for transparency and accountability.

Kenya’s TSA implementation is supported by the World Bank and the International Monetary Fund, which provide technical assistance, capacity building, and advisory services.