Parastatals have paid Uhuru suppliers’ arrears of Ksh91 billion in the past days


Parastatals have paid Uhuru suppliers’ arrears of Ksh91 billion in the past days


Last year, outstanding bills to parastatals rose by Sh122 billion, exacerbating the suppliers’ cash flow crunch. file image | NMG

Indebted parastatals paid a record NIS 91.7 billion owed to suppliers in the final days of President Uhuru Kenyatta’s rule, as they raced to mollify his political base ahead of the 2022 general election.

Quarterly budget disclosures by the Treasury show arrears, which are largely historic, fell to Sh356.9 billion in September from a record Sh448.6 billion in June, the lowest in a year and a quarter.

The 20.44 percent drop in outstanding billings related to state corporations in the quarter was the sharpest since the Treasury Department began making regular disclosures in 2019.

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The huge sum came amid a growing power struggle between Kenyatta’s allies and those of his then vice president and incumbent President William Ruto, who saw himself as the heir apparent.

Kenyatta backed veteran opposition leader Raila Odinga in the presidential duel and was eager to defuse public anger as ordinary Kenyans voiced concerns about declining cash flow, fewer job opportunities and a rising cost of living.

Small and medium-sized businesses feel the financial pain of years of delayed payments for everything from public relations campaigns to building material supplies.

Late payments, in turn, are hurting the financial sector, with non-performing loans jumping this year to their highest level in more than a decade.

Late payments underscore cash flow crises in poorly managed and corrupt state-owned enterprises.

Mounting supplier debts at the national and provincial levels have exacerbated cash flow challenges for businesses, especially small and micro-enterprises, forcing some of them to go out of business.

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President Ruto, who took office on Sept. 13, has vowed to prioritize the payment of outstanding bills that have left many small and medium-sized businesses at the mercy of auctioneers.

“I am aware that many individuals, families and businesses have been devastated and forced to close due to unpaid government bills,” Dr. Ruto said during his inauguration.

“We will prioritize a speedy resolution of our pending bills so that the government can meet its obligations and facilitate better economic performance.”

Since 2019, the Treasury Department has issued repeated circulars to ministries, departments, and agencies as well as parastatals to make payments to government contractors and suppliers a priority in efforts to support economic growth and job sustainability.

The Treasury reiterated in its most recent Expenditure and Budget Review Report for the first quarter of the current year ending in June 2023, “The national government’s policy on clearing pending securities continues.”

“Every MDA.” [ministries, departments and agencies] Therefore, it is expected to continue to prioritize the payment of outstanding bills by reconciling them as first charges in the 2021/22 fiscal year budget in line with Treasury Circular 7/2019.”

Just over two-thirds, or Sh241.26 billion, of the arrears of parastatals were owed to public project contractors and suppliers of goods and services at the end of September, down 17.89 per cent from those three months earlier.

The remaining outstanding bills of exchange of Sh115.64 billion were in statutory and unpaid deductions, down 25.28 per cent from Sh154.77 billion in June.

These include “pay as you earn” taxes to the Kenya Revenue Authority, pension contributions to the National Social Security Fund and the Local Authorities Pension Fund as well as medical coverage arrears to the National Health Insurance Fund and other insurance companies.

Treasury data shows that MDA accumulated, however, Sh26.2 billion in additional bonds to NIS 82.3 billion in the quarter under review.

This brought the total outstanding bills nationwide to Sh439.2 billion from Sh504.7 billion in June.

“Accounting officers must ensure that outstanding bills and carryovers from fiscal year 2021/22 are prioritized and paid within the current year’s budget allocation,” Treasury Secretary Nguguna Ndongo wrote in the circular providing guidance on the supplementary budget earlier this month.

High pending bills have become a major economic challenge despite directives to state entities to prioritize verified arrears in their spending plans.

The Public Sector Suppliers Association said in July that 3,400 of its 4,100 members owed cash dating back to 2014, and called for accounting officials to be punished for non-payment.

“The reason is the lack of clear penalties and personal responsibilities on the part of government employees who handle procurement and payment,” the lobby’s general secretary, Simon Gichocki, told Business Daily.

The Treasury said earlier this year it was considering drafting a legal framework to punish accounting officials for failing to honor verified invoices for goods supplied or services rendered to state entities as a first count.

“The government is exploring legal mechanisms to resolve the issue of pending bills,” Treasury officials wrote in the Budget Policy Statement (BPS) for 2022.

“Accounting officers will be forced to clear outstanding invoices, and failing to do so, penalties will be imposed on accounting officials.”

Some state entities in reports of sectoral budget proposals have accused the Treasury of not allocating sufficient funds to clear outstanding bills despite their request to treat it as the first cost in the budget.

The Cabinet Secretary for Roads, Transport and Public Works, Kipchumba Morkumen, told lawmakers before confirming that he plans to float road bonds to offset the $140 billion owed to contractors.

He said the proposed bond would secure billions of shillings collected from motorists through road maintenance tolls and tolls.

The government collects 18 shillings per liter of petrol and diesel under the Road Maintenance Fee Fund (RMLF) for road construction and rehabilitation.

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