Gov’t burdens economy with Ksh.201 billion pending bills

The government has seemingly failed in its role as an enabler of growth in the economy as it saddles businesses with Ksh.201.2 billion in unpaid dues.

According to disclosures made by the National Treasury to the Budget and Appropriations Committee (BAC) on Tuesday, Ministries and their respective State Departments (MDAs) make up the worst payers to government suppliers with an accumulated Ksh.137.94 billion in historical pending bills as of October 31, 2019.

The State Department of Infrastructure, which falls under the larger Transport ministry, carries the bulk of blame with a net 40 percent of all pending bills or an equivalent Ksh.71.2 billion as per Treasury disclosure at the end of June.

When put to task on the weighty outstanding sum to government contractors by Treasury, the Ministry of Transport quotes the early closure of systems before the processing of payments.

The Ministry of Health is meanwhile the second culprit having failed to clear a net sum of Ksh.41.7 billion in supplier monies while passing the shoulder of blame to insufficient funding from Treasury to meet recurrent bills.

Counties meanwhile account for a lesser pending bills subtotal of Ksh.64.2 billion with Ksh.28 billion making for eligible/verified amounts from the recent special audit by the Office of the Auditor General (OAG)

15 out of the 47 counties have notoriously failed to make any efforts towards the payment of the bills including; Nairobi, Narok, Machakos, Mombasa, Baringo, Garissa, Kirinyaga, Tharaka Nithi, Migori, Isiolo, Tana River, Vihiga, Nandi, Kiambu and Bomet.

‘Hakuna pesa’

The lock-down in payments to government suppliers has effectively weighed hard on the economy as Kenyans suffer from the acute lack of money in their pockets from the stiff liquidity crunch.

The non-payment of the bills which match up to a near three percent of Gross Domestic Product (GDP) has further resulted in the knock on effects of reduced consumer demand and a depressed outlook in company productivity.

Stanbic Purchasing Managers Index has mirrored the tough going elements for local businesses with optimism for output for businesses hitting a New Year low at the end of October.

“Private sector activity was softer in October as firms again lament what they term as ‘cash-flow’ issues,” said Stanbic Bank Regional Economist Jibran Qureishi.

Ironically, banks which have on one side benefited from increased lending to government have suffered indirectly from the accumulated bills with the sector’s share of non-performing loans (NPLs) having risen to a high 12.7 percent at the end of the government’s fiscal year in June.

Exchequer freeze

Haunted by the legacy of unpaid dues, the Presidency has, through the Head of Public Service, instigated last minute enforcement reforms to stem further damage to the economy.

Among the key reforms to pending bills include the immediate clearance of outstanding bills to suppliers by the end of the month.

While pending bills are defined as first charge items on all exchequer issues, ministries and counties have continued to ignore the charges to call for a change of stance to the extreme.

As such, the National Treasury has announced an expected freeze to equitable transfers beginning with the 15 most named unaccountable counties which have failed to show effort in the clearance of the bills from December 1.

Meanwhile, implicated MDAs will suffer the same consequences with the National Treasury also opting for an end to exchequer issues at the end of the month.

“We are going to really enforce this as these monies are owned to the private sector and the Kenyan people and if they are not paid, we will be extending their suffering,” Treasury Acting Cabinet Secretary Ukur Yatani told the BAC.

The National Treasury is further set to reconstitute the Pending Bills Closure Committee to offset the historical pending bills inside MDAs which compose of Ksh.42.7 billion