Treasury Weighs New Repayment Terms as Water Sector Debt Tops KSh142B

Officials are weighing debt restructuring or stronger recovery measures to align repayment obligations with the money water institutions can actually collect. No specific institutions have been named for restructuring, and no loan write-off or final terms have been announced.

The issue is bigger than an accounting dispute between the national government and water agencies. These loans helped fund infrastructure, but weak repayment means the Treasury has struggled to recover money it lent on to public water institutions. At the same time, utilities need enough cash to maintain networks and deliver water and sanitation services. Any change must balance debt recovery with the ability of providers to keep operating.

A large share sits with one agency

The latest figures reported by Business Daily put Athi Water Works Development Agency's outstanding loans at KSh61.96B, around 44% of the combined KSh142.1B balance. Athi Water develops and manages bulk water and sewerage infrastructure serving Nairobi, Kiambu and Murang'a counties.

Coast Water Works Development Agency followed with KSh18.89B, while Lake Victoria North Water Works Development Agency owed KSh16.49B. The balances cover institutions responsible for bulk water infrastructure across several counties, so their financial position can affect the pace at which public projects are maintained or expanded.

Several smaller utilities also recorded higher balances over the year. Kwale Water and Sewerage Company's loan balance rose to KSh2.77B from KSh1.39B. Kilifi Mariakani Water and Sewerage Company's balance increased to KSh1.69B from KSh1.26B, while Mombasa Water and Sanitation Company's rose to KSh1.85B from KSh1.30B.

Malindi Water, Sewerage and Sanitation Company's balance reached KSh1.86B, up from KSh1.58B. Tavevo Water and Sewerage Company's balance increased to KSh1.56B from KSh964M. The report does not establish how much of the overall increase came from new loans, interest, accounting adjustments or other changes, so the rise should not be treated as a direct measure of new borrowing alone.

Why repayment has become difficult

The Treasury's concern, as reported by Business Daily, is that arrears are weakening the financial position of water institutions and reducing their ability to service debt. The national government has borrowed money and on-lent it to public bodies, which are then expected to repay the Treasury under agreed arrangements.

Water services are devolved, and the flow of money between national agencies, county governments and county-owned companies can complicate repayment.

Treasury officials have previously pointed to cases where some county-owned water companies did not remit funds to the relevant water works agencies, restricting their ability to meet debt obligations. The National Treasury's annual debt management reports set out the wider framework for tracking government on-lending and public debt.

The latest report also shows that repayment is possible in some cases. Nyeri Water and Sewerage Company reduced its outstanding balance to KSh303M from KSh353M during the review period after cumulative repayments of KSh857M. Eldoret Water and Sanitation Company cut its balance to KSh187M from KSh210M after cumulative repayments of KSh872M.

Those examples suggest that the repayment record is not uniform across the sector. Differences in billing, collections, costs, transfers and the timing of infrastructure spending may matter, but the published figures do not provide enough detail to identify the causes at each institution.

What restructuring could change

Debt restructuring usually changes the timing or conditions of repayment rather than automatically cancelling a loan. For a water institution with irregular income, a longer repayment period or a schedule tied more closely to actual revenue could make payments more manageable. Stronger recovery measures could instead require more regular reporting, closer monitoring of collections and firmer enforcement of remittance obligations.

The Treasury has not said which approach it will use, which institutions will qualify, or whether any principal or interest would be written off. Those details matter because a concession that improves one utility's cash flow could also reduce the amount the government ultimately recovers. A tougher collection plan could improve recovery, but it would not solve an underlying gap between revenue and operating costs by itself.

For residents, the immediate effect is not yet clear. The debt figures do not establish that water tariffs will rise or that a particular service will be interrupted. The more direct concern is whether providers can finance maintenance, pay suppliers and sustain infrastructure while meeting old loan obligations.

If the financial arrangements remain unworkable, investment plans may be harder to fund; if they are reset without accountability, taxpayers could carry more of the cost.

Mwenendo has also reported on state corporations borrowing KSh62B without a government guarantee, another example of how public-sector borrowing can create risks that are not always visible in the main government debt headline.

The next test is whether the Treasury publishes a clear plan with named institutions, repayment terms, reporting requirements and a way to measure recovery. Until those details are available, restructuring remains under consideration, not an approved debt-relief package.

Reporting credit: The June 2026 loan balances and the Treasury's current options in this report are based on Business Daily's reporting by Constant Munda, published on 12 October 2026. The public Treasury reports page provides background on government debt reporting, but the latest institution-by-institution figures were not independently confirmed from a separately accessible Treasury table at filing time.