State entities defy Uhuru on unpaid bills in Sh64bn roll-over

State ministries, departments and agencies (MDAs) rolled over Sh64.7 billion in arrears to suppliers and contractors in the financial year ended June 2019 to the current year, signalling defiance of President Uhuru Kenyatta’s directive.

The Treasury document released on Friday shows the pending bills comprised Sh63.6 billion owed to contractors of capital projects such as roads and Sh1.1 billion in recurrent votes. The cash owed to suppliers for goods and services they rendered to the State by the end of June 2019 was more than double Sh29.3 billion a year earlier.

“The government policy on pending bills is that the bills are a priority for clearance during the incoming FY (financial year),” the Treasury says Quarterly Economic and Budgetary Review report for the fourth quarter of 2018-19 fiscal year.

“Hence the directive to all the MDAs to ensure settlement of pending bills as a first charge in the 2019/20 FY as budget enforcement continues.”

Mr Kenyatta on June 1 directed State entities to settle all pending bills without audit queries by end of last financial year and urged the 47 counties to follow suit.

“Pending payments have negatively affected many businesses, particularly those whose bulk of capital is now locked in non-payment. This has also reduced overall spending and business activity in our economy,” the President had said.

Organisations including the World Bank Group, the Kenya Private Sector Alliance (Kepsa) and Kenya Association Manufacturers, had earlier in the year blamed accumulating State bills for constraining cash supply, hurting corporate profits and jobs. The Kepsa said in April pending bills had compounded cash flow challenges for companies, which have since September 2016 been grappling with reduced access to credit following the enforcement of ceilings on interest charged by banks on loans.

Former Treasury Secretary Henry Rotich said on June 13 when he presented the Budget Statement that some Sh10.9 billion verified pending bills were to be cleared by end of June, adding that some bills whose value he did not disclose had been settled earlier.

In the second supplementary budget approved in June, lawmakers had approved Treasury’s proposal to increase expenditure for scandal-hit National Youth Service by Sh4.8 billion to Sh12.6 billion largely for settling pending bills, offering relief to suppliers whose dues had been frozen pending audit.

“The reasons there are shackles on private sector and subsequently job creation is on one hand, we have the government not paying contractors and suppliers and, on the other hand, there’s limited access to credit as a result of the rate cap,” Jibran Qureishi, lead economist for Stanbic Bank in East Africa said in a past interview.