Sessional Paper No. 01 of 1998 on Government Take Over of Servicing of Outstanding Loans Covered Under the Exchange Risk Assumption Fund Amounting to an Equivalent of Ksh. 736,959,824 from Industrial Development Bank

Abstract

The ERAF scheme was set up by the Government under Legal Notice No. 14 of 29th January, 1991. The purpose of this fund was to absorb losses incurred on loans extended to projects by IDB, among other development financial institutions, under the existing lines of credit. Following the dissolution of the Exchange Risk Assumption Fund pursuant to regulation 11 of the Exchaquer and Audit Act Cap. 412 and taking into account the financial projections of Industrial Development Bank, the Government of Kenya recognised the need to harmonize the capital structure of the Bank with other parastatals in the banking sector. In restructuring Industrial Development Bank, the Cabinet approved a debt swap of the outstanding ERAF claims due to IDB from the Government with the remaining loans quaranteed by the Government under the ERAF scheme.