This archive report was first published on 25 November 2019.
As of November 25, 2019, the National Treasury revealed that public entities in Kenya were holding over Sh200 billion in overdue debts owed to private contractors and suppliers. This staggering amount is a significant hindrance to the economy's liquidity flow and profitability of firms doing business with the State.
The 47 counties and government ministries, departments, and agencies (MDAs) had pending bills amounting to Sh108.4 billion and Sh82.7 billion, respectively, at the start of the financial year. This has led to cash flow constraints, causing small businesses in financial distress to blame counties and MDAs for their woes.
It is imperative that government entities clear all legitimate pending bills before the end of the calendar year. The economy cannot function normally when those doing business with public entities are uncertain about their cash flows.
The Executive's directive that pending bills be the first charge on budgets is a good start, but public entities have largely ignored it. The Treasury has resorted to radical measures such as withholding some allocations for counties that have failed or are unwilling to pay off their debts.
The National Assembly should speed up debate on the bill seeking to create a legal framework for punishing firms and public agencies that delay payment for goods and services supplied by small businesses. The private sector has been vocal about pending bills, and it would be beneficial to have a criminal offence for delaying payment by more than 60 days or 90 days, with such overdue debts attracting interest charges.
As the World Bank has warned, the rise in public pending bills strangles the economy by limiting liquidity flow and profitability of firms doing business with the State. It is essential that government agencies listen to this counsel and take immediate action to clear pending bills.
