This archive report was first published on 19 November 2019.
As the country grapples with a cash crunch, the National Treasury has pledged to settle outstanding supplier bills by the end of the month.
Chairman of the National Development Implementation and Communication Cabinet Committee, Francis Matiangi, made the announcement during a press conference on Monday, November 18, 2019.
"There are areas where pending bills have strangled some businesses. We are satisfied with the progress being made. We have committed to the private sector to stay on this path so that businesses can grow," Matiangi said.
The private sector, however, expects honesty and transparency from the government in dealing with various issues, including tax administration and the competitiveness of locally produced goods and services.
"There is a long list of issues that have been with us for a long time. The government has been clear that it neither wants to keep hearing of these issues nor should anyone act surprised," Kenya Private Sector Alliance (KEPSA) Chairman Nick Nesbitt said.
Despite the government's promise to clear outstanding bills, the national government and counties have yet to settle first-charge items from their registry, three months into the 2019/20 financial year.
As of June 2019, the government owed suppliers a total of Ksh.64.7 billion, with the majority of the debt sitting in the development basket.
The net sum owed to businesses could be higher due to the accumulation of bills from previous reporting periods.
Earlier this year, the Office of the Auditor General audited and verified a sum of Ksh.40.5 billion in pending bills from counties, but payments for the majority of the bills remain unaccounted for.
The impact of non-payment of pending bills is reflected in the deterioration of private sector growth sentiments, with expectations on future output falling to year-to-date lows in October, according to research from the Stanbic Purchasing Managers Index (PMI).
"Private sector activity was softer in October as firms again lamented what they term as 'cash-flow' issues," said Stanbic Bank Regional Economist Jibran Qureishi.
The clearing of outstanding supplier monies is expected to create stimulus for private sector recovery, flanked by the recent lift to interest rate caps.
Further, the settlement of bills is set to unlock demand while bringing down banking sector non-performing loans (NPLs) levels, which hit a high 12.7 percent in June.
Other interventions to prop up the sector have included the reduction of Value Added Tax (VAT) refunds from six percent to two percent under amendments contained in the Finance Act, 2019.
