Gov’t drags down businesses as unpaid bills to suppliers hit Ksh.369 billion

The government has continued to drag down local businesses by failing to clear its pending arrears as unpaid bills hit Ksh.368.9 billion.

New data from the latest National Treasury Quarterly Economic and Budgetary Review report for the period ending March 31 shows total outstanding national government pending bills rose by four times from December 31 and six times from June 2019.

The bulk of the arrears which is an equivalent 86.5 percent of arrears of Ksh.319.1 billion accrue to State Corporations while the balance of Ksh.49.8 billion are due to ministries state departments and other government entities.

“The bulk of the pending bills are for contractors/suppliers. The State corporations pending bills include unremitted statutory and other deductions, pension arrears, and others. ministries/State departments and other government entities pending bills are mainly historical as at the end of the FY 2018/19 including the contested ones,” notes the report.

The rise in unpaid bills by the national government is expected to hit hard and local business particularly small and medium enterprises (SMEs) who currently face a parallel devastation from the ongoing Covid-19 pandemic.

Moreover, the lack of clearance to historical bills shows government agencies have failed to heed to calls by the National Treasury to settle their age old arrears to local businesses in line with Circular No. 7 of 2019.

Late last year, the National Treasury Cabinet Secretary Ukur Yatani had put up a concerted force to push State actors into clearing the arrears including threats to pull down exchequer funding to non-compliant parties including counties.

State agencies have continued to defy public finance management (PFM) rules which put pending bills as first charge items.

The persistent breach of the PFM guidelines has seen many businesses that supply government fold as the unpaid bills deny enterprises much needed liquidity to ensure continuity.

The unpaid supplier bills now make up for 3.8 percent of Kenya’s Gross Domestic Product (GDP) in 2019.

In comparison, last week’s economic rescue package of Ksh.53.7 billion which includes Ksh.10 billion for pending bills payments and VAT refunds to businesses represents a mere 0.6 percent of GDP.