As a consequence, the entities rely heavily on the Exchequer for bailouts to forestall possible bankruptcy. The bailed-out public entities are often viewed as ‘Too Big to Fail’, owing to their critical role in the economy regardless of the cost to the taxpayer. The term ‘Too Big to Fail’ became popular after the 2007/08 Global Financial Crisis in the US, where the State bailed out financial institutions to avert an international economic collapse. In Kenya, a classic case of a State-run entity that would be ‘too big to fail’ is Kenya Power. The economist Paul Krugman notes that the concept ‘too big to fail’ holds if the economies of scale are worth conserving, are well regulated and are commensurate with their economic impact.

Source: Daily Nation March 07, 2020 15:00 UTC