How Ruto clearing pending bills will boost the economy

It will help Kenyans clear debts and spend on goods, services

In Summary

• Kenya has become a country of pending bills, and it all starts with the government

National Treasury building
TREASURY: National Treasury building

Have you noticed that nearly everyone is waiting to get paid by someone else?

Landlords are waiting for their tenants to get paid. The tenants are waiting for their delayed salaries to come through. Building contractors are waiting for clients to pay up. In turn, those clients are also waiting for some other payment to come through before settling their bills.

Even the neighbourhood watchmen are waiting to be paid because their employers have not been paid either. Taxi drivers, boda boda operators and mama mbogas are owed money, too. It's hard to stop selling on credit when your loyal customers tell you they are chasing up on getting paid.

Kenya has become a country of pending bills, and it all starts with the government. Data from the National Treasury shows the national government owed Sh504.7 billion to suppliers and contractors as of June 30. County governments owed Sh128.94 billion on December 31 last year as reported by the Comptroller of Budget. The money is owed to both small and large businesses, with some bills pending from as far back as 2015.

The government is the largest single employer and biggest source of demand for goods and services. When the government is slow to pay businesses, the rest of the economy is affected detrimentally.

In recent years, many small businesses have closed down while awaiting payment for goods and services delivered to government agencies. President William Ruto acknowledged this fact during his inauguration speech on September 13.

"We are faced with Sh600 billion in pending bills for goods and services supplied to the government. I am aware that many individuals, families and their companies have been driven to ruin and forced to shut down over government unpaid bills," President Ruto said.

The new President promised the business community that a mechanism for resolving outstanding payments would be announced within several weeks of his inauguration. "We are committed to ensuring that they [creditors] are paid in the shortest time possible," he said.

Pumping Sh600 billion back into the hands of local businesses would make a huge, positive difference to the economy. Businesses would clear the arrears they owe employees, landlords, contractors, farmers and other suppliers. There would be an immediate increase in the demand for goods and services across the country when people embark on a spending spree after receiving their dues.

Indeed, the payment of pending bills by itself is a "low-hanging fruit" that would win valuable points for an incoming political leadership eager to be different from its predecessors. Most of the money will eventually return to the government as taxes are collected from intensified business activity. Clearing up pending bills really would be a win-win for everyone in Kenya.

Last July, Auditor-General Nancy Gathungu revealed that officials in ministries, departments and parastatals were committing their organisations to procurement contracts without the money to pay for them. Gathungu said nonpayment of pending bills is a crime.

Tough Times

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