Pending bills soar to Sh537bn despite payment pledge

Data from the National Treasury shows pending bills climbed from Sh504.7 billion in the previous quarter as the Kenya government faced a cash crunch that saw it delay paying civil servants.

A large number of business people who have contracts with the government have ended up closing businesses, being auctioned or blacklisted by credit reference bureaus after falling behind on loan repayments.

“We shall give priority to the expeditious resolution of our pending bills so that the government can meet its obligations and facilitate better economic performance,” President William Ruto said at his inauguration.

He said the government would work on a proposal for the suppliers to collect the money within a shorter period.

The Quarterly Economic and Budgetary Review Report released yesterday shows state corporations owe suppliers 85 per cent or Sh450.2 billion of the total amount while ministries and state departments are expected to clear Sh79.3 billion.

This is despite the existence of the National government policy on the clearance of pending bills.

"All MDAs are, therefore, expected to continue with prioritisation of payment of the pending bills by settling them as a first charge in the current financial year budget in line with the Treasury Circular No. 04/2022,'' the paper reads. 

Last year, the Budget and Appropriations Committee of the National Assembly proposed setting up a special fund to be financed through a long-term debt to pay off verified pending bills for goods and services rendered and court awards for contract breaches, unlawful dismissals and human rights violations.

There is also a proposal by the International Monetary Fund (IMF) to include parastatal and county debts in the public debt.

Currently, the Treasury only recognises guaranteed debts, but the IMF wants it to include all loans of State-linked firms, a move that will push the country’s Sh9.4 trillion debt up by at least Sh3 trillion crashing through the Sh9.1 trillion ceiling set by Parliament.

Kenya's debt has been pilling over the past 10 years, a move that has forced the exchequer to review the debt limit, proposing a ceiling of 55 per cent to GDP as opposed to a specific figure. 

This is the second time in just a year the government is revisiting the debt ceiling plan after the past regime did away with the debt to GDP ceiling to cap it at Sh10 trillion.

Initially, the government had capped debt at Sh9.1 trillion after the Parliament approved the debt ceiling limit in 2019. 

In just three months to March 31, net domestic borrowing amounted to Sh287.8 billion against a target of Sh410.9 billion. The borrowing comprised of Sh242.4 billion from Non-Banking Financial Institutions, Sh44.7 billion from the Central Bank.

Others are Sh0.6 billion from non-residents, Sh2.8 billion from commercial banks and net domestic loan repayments of Sh2.9 billion. During the same period in FY 2021/22, the net domestic borrowing amounted to Sh598.6 billion. 

The stock of gross domestic debt increased by Sh347.2 billion from Sh4.19 trillion billion in March 2022 to Sh4.53 trillion. The net domestic debt was Sh4.15 billion by the end of the period under review.

In dollar terms, external public debt stock increased by $38.02 million from $36.62 million as of March 2022 to $36.7 million. 

Although the Kenya Kwanza government has vowed to significantly cut external loans, the repayment of the inaugural Eurobond taken in 2014 is due, forcing Ruto's government to shop for the fifth Eurobond. 

The latest credit score by Moody’s investor, which downgraded the country’s creditworthiness from B2 to B3, is however expected to erode this.