- The Parliamentary Select Committee on Budget and Appropriation says such a scenario has a serious implication on the balance sheet and economic growth.
- Late last year, President William Ruto promised to work towards clearing the Sh600 billion debt.
Businesses that have been praying that the state settles debt owed will wait longer after the government failed to consider pending bills in the latest budget review.
According to the Supplementary Budget II 2023/24 tabled in the Parliament early this week, great focus was put on the heavy El Nino rains experienced in the past three months.
According to the report, President William Ruto's government plans to slash the budget for the year ending June 30 by Sh144 billion, a further 3.6 per cent reduction to Sh3.84 trillion.
Even so, the new budget for the current financial year will now be 1.04 per cent more or Sh39.4 billion larger than the one tabled in June 2023.
Recurrent spending has been increased by a smaller margin than had been proposed in the initial Supplementary II estimates to Sh51.11 billion from Sh71.29 billion.
Development spending on other hand has been decreased by a larger margin than had been proposed in the initial estimates by Sh75.3 billion from Sh67.3 billion.
The Parliamentary Select Committee on Budget and Appropriation has sounded alarm bells on the state's failure to provide for pending bills in the supplementary budget even as the government year comes to a close.
"This lack of provision is worrisome because budget adjustments are likely to lead to the accumulation of pending bills,'' the committee says.
It adds that such a scenario has a serious implication on the balance sheet and economic growth as it further squeezes liquidity from businesses.
"The accumulation of pending bills can hinder the financial health of these businesses, potentially leading to cashflow challenges and affecting their operational stability.''
It has asked the Pending Bills Verification Committee to expedite review, propose a settlement plan to prevent further economic strain and ensure sustainable fiscal management.
Similar views have been aired by the World Bank which released the Kenya Economic Update on Wednesday in Nairobi.
According to the lender, the spike in pending bills is pushing a lot of businesses into default, where the private sector remains a major supplier to the government.
“Pending bills in Kenya and non-performing loans have been trending in the same direction for the last two years,” the World Bank said.
Last month, the verification team led by the former Auditor General Edward Ouko said the government owes contractors and suppliers Sh110 billion, disputing an initial figure of Sh641 billion indicated in the Quarterly Economic and Budget Review report by the National Treasury released last September.
The failure to consider boosting allocations towards clearance of the pending bills contradicts various promises by the government.
In February, the National Treasury PS Chris Kiptoo promised to add pending bills in the supplementary budget to pump cash into the economy.
Late last year, President William Ruto also promised to work towards clearing the Sh600 billion.
The government data shows that out of over Sh600 billion owed, the State corporations had the highest portion at Sh509.4 billion (73.9 per cent), while MDAs were yet to pay Sh121.2 billion (26.1 per cent).
County governments were yet to pay Sh163 billion as of that time, bringing the total bills to about Sh795 billion.
Furthermore, the revenue target has been slashed by a staggering Sh250 billion, despite high taxes aimed at boosting domestic revenue collection.
As a consequence, there's been a rejig in the domestic borrowing targets for the current financial year to Sh589.3 billion compared to Supplementary Budget I's Sh474.5 billion
Net foreign financing is now set at Sh319.3 billion compared to Supplementary Budget I's Sh412.1 billion.
According to the National Treasury, the Kenya Revenue Authority missed its collection target for the first six months of the year by Sh182.4 billion mainly on account of a shortfall in ordinary revenues of Sh186.2 billion.
Despite the missed target, year-on-year revenue collection rose 10.7pc when compared to the same period in 2022.
The exchequer says shortfalls in revenue performance and liquidity constraints have hurt the execution of various government programmes in the current year.
“Expenditures were below target by Sh360.9 billion on account of below target disbursements towards both recurrent expenditure and development expenditures,” Treasury said.