Pending bills hit Sh567bn as suppliers struggle with loans

They include payment to contractors and general suppliers.

In Summary

•The highest percentage of the pending bills (64.4 percent) belong to contractors and suppliers.

•Ministries and state departments bills constitute mainly of historical bills for the last two years.

Treasury CS Njuguna Ndung'u before the Finance Committee in Parliament on May 17
Treasury CS Njuguna Ndung'u before the Finance Committee in Parliament on May 17
Image: FILE

Government’s pending bills hit Sh567.5 billion in June 2023, latest Treasury data shows, amid high loan defaults by suppliers struggling with cash-flow.

These comprise of Sh443.6 billion (78.2 percent) owed by ministries and state departments while other government entities and state corporations owe Sh123.9 billion.

The state corporations’ pending bills include payment to contractors, projects and suppliers.

The highest percentage of owed amounts (64.4 percent) belong to contractors and suppliers, with ministries and state departments bills constituting mainly of historical bills for the last two years.

This has seen suppliers struggle with cash flow amid high loan defaults by individuals and companies doing business with government, leading to some being auctioned.

According to the World Bank, the spike in pending bills is pushing a lot of businesses into default, where the private sector remains a major supplier to government.

Pending bills in Kenya and non-performing loans have been trending in the same direction for the last two years,” World Bank says in its latest Kenya Economic Update report released in June.

Non-performing loans for more than three months, as a percentage of total loans rose to 14.7 percent, the highest since June last year.

Pending bills by the national government have increased from Sh64.7 billion four years ago.

The latest market perception survey by the Central Bank of Kenya on CEOs of major companies and sectors, indicates growth prospects remain subdued for the next 12 months.

“Business optimism for company and sectoral growth prospects remained subdued on account of high interest rates, the political situation in the country, pending bills impacting cash flow and the weakening Kenyan shilling,” CBK said in its survey.

However, respondents expressed optimism that the reducing inflationary pressures, expected improved performance of the agricultural sector coupled with the government focus on the digital economy could support growth.

Suppliers and government agencies who rely on statutory deductions from staff members in the public and private sectors are also affected.

Institutions under the transport ministry, agriculture and education (mainly universities) account for the most bills.

In June, the Cabinet approved the establishment of a special committee on pending bills.

The Pending Bills Verification Committee was tasked with the auditing of liabilities for the period between 2005 and 2022.

In a meeting chaired by President William Ruto at State House, the Cabinet noted that pending bills remains a sticky issue.

The committee consists 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.

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 the team.

The committee was to examine and submit interim reports to Treasury upon verification, with government promising to honour the obligation in question.

The move is aimed at establishing the integrity of all bills and cushioning small enterprises against liquidity inadequacies.

Crucially, the committee will propose a mechanism to stop future pending bills.

It was agreed that the Committee will present its final report within a year.

“The National Government policy on clearance of pending bills continues to be in force,” Treasury affirmed in the lates quarterly economic and budgetary review.

According to CS Njuguna Ndung’u, the National Treasury is currently developing a comprehensive strategy to clear outstanding stock of verified pending bills of the national government over the medium term.

In this strategy, deficiencies and lapses that led to accumulation of pending bills will be addressed, Treasury notes.

All ministries, departments and agencies are are expected to clear all the expenditure carryovers from financial year 2022/23 as a first charge, before payment of commitments of the current financial year.

WATCH: The latest videos from the Star