A team appointed by President William Ruto to review pending bills has issued its first report clearing debts of Sh206 billion. Small businesses that have been struggling with cash shortages owing to the outstanding debts are set to reap big.
The pending bills approved by the review committee chaired by former Auditor General Edward Ouko are for those below Sh10 million.
National Treasury Cabinet Secretary John Mbadi on Friday said the government would soon start paying the pending bills approved by the Ouko team.
“The Edward Ouko team has given us a preliminary report. Out of the bills that were submitted to the committee amounting to about Sh665 billion, they have analysed around Sh474 billion worth of bills,” Mbadi told the Star.
“Out of that they have been able to clear around Sh206 billion, so either these bills have been fictitious or maybe too much of other charges like interest and penalties,” the Treasury CS said.
The Attorney General, the State Department of Roads, the State Department of Public Works, the State Department of Housing and Urban Development and the Public Procurement Regulatory Authority are represented in the committee.
Representatives of the Ethics and Anti-Corruption Commission, the Law Society of Kenya, the Institute of Engineers of Kenya and the Institute of Certified Public Accountants of Kenya are also part of Ouko’s team.
As of September 2024, the national government owed suppliers and contractors more than Sh528 billion.
Counties separately owed Sh168 billion. State corporations owed the highest amount at Sh410 billion while ministries and state departments had not paid Sh118 billion.
The state corporations pending bills included payment to contractors and projects, suppliers, unremitted statutory and other deductions, and pension arrears.
Economists have opined that the outstanding payments have had adverse effects on the economy, besides devastating the concerned suppliers.
Suicide cases have been reported by families of suppliers who were not paid by the government yet were under pressure from lenders.
According to Mbadi, 95 per cent of the Sh206 billion that has been cleared for settlement is made up of small enterprises owed below Sh10 million.
The Cabinet has approved the payment of the bills, the CS stated, adding that they will be catered for in the current financial year.
“The last meeting we had as Executive under the chairmanship of the President we agreed that we make a provision in the supplementary budget two, if there will be space, that we clear these small bills owed to the SMEs,” Mbadi said.
The National Treasury is expected to submit the second supplementary estimates to the National Assembly this month when the House resumes from long recess on February 11.
Last year, President Ruto promised prompt payment of all pending government bills to micro, small and medium businesses to stir the overall economic growth.
The developments will go a long way in relieving suppliers’ pain as some bills date back more than 10 years.
The release of the billions is thus expected to inject the much-needed cash flow to give life to struggling businesses and the economy.
The move is seen as part of President Ruto’s economic recovery efforts aimed at jumpstarting the economy. Experts have warned that the non-payment mess could push many people into depression and kill businesses.
The Public Finance Management Regulations, 2015, for counties and for the national government says eligible or verified pending bills are budgeted as a first charge of a subsequent year’s budget.
Despite the law and various directives by the presidency as well as Cabinet and other budget watchdogs, the pending payments have barely moved. Just last week, the Kenya Federation of Employers warned government to urgently settle pending bills owed to businesses to avoid job losses.
“Some of the steps the government needs to take to ensure fiscal responsibility are prioritising efficiency in public service delivery, honouring contracts, and ensuring timely payment of bills, including clearance of pending bills,” the FKE statement said in a statement to newsrooms.
Kenya Private Sector Alliance has also warned against continued holding of payments to small businesses.
“It is tough for businesses when payments are not done. We have seen businesses, especially SMEs, going under due to unpaid bills both by government and other businesses,” Kepsa chief executive officer Carole Kariuki told the Star in a recent interview.
The government has however moved to assure even the big-value contractors that their bills would be settled once reviewed and approved.
Mbadi said the government was working out ways to ensure the remaining suppliers are also prioritised. “We will now be remaining with bigger bills for which already we have strategy. at will help reducing the pending bill and bring more liquidity to our economy,” the Treasury CS said.
During his vetting last year, Mbadi promised transparent settlement of bills, prioritising the old ones to ensure equity.
“I will make sure that we have a system in place which locks anyone who attempts to pay a new bill and ignoring an old one...the system can lock you out, so that first in first out. If a bill is supposed to be payable let it be paid,” he told the vetting panel chaired by National Speaker Moses Wetang’ula.
A separate report by Auditor General Nancy Gathungu showed that pending bills in respect of donor-funded projects alone stood at Sh48 billion as of June 30, 2023.
“The suppliers of goods and services to public entities may also face unwarranted financial charges from their financiers as they supply goods and services on credit to the government without proper arrangements or agreements on credit facilities with the government,” the auditor said.
“Failure to settle the bills has an effect of withholding circulation of cash in the economy and affects the smooth operations of suppliers and Micro, Small and Medium Enterprises (MSMEs),” Gathungu explained.
Controller of Budget Margaret Nyakang’o in her review of the fi rst quarter of this year’s budget fl agged the notoriety of state agencies in failing to settle their dues.
She asked the government to
ramp up revenue collection to
ensure planned activities are adequately funded.
