Economy

State to deny agencies cash over Sh346bn pending bills

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National Treasury building in Nairobi. FILE PHOTO | NMG

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Summary

  • The warning comes after ministries and departments’ unpaid bills rose by Sh13.4 billion in the three months to September, hurting cash flow in firms that have suffered from reduced demand following the pandemic — which has triggered job and pay cuts.
  • Business owners have blamed the non-payments on mismanagement and corruption with other citing the non-payment for their collapse and auction by banks over loan defaults.

The Treasury will stop releasing funds to scores of State agencies and government ministries until they start paying the Sh346.2 billion owed to their suppliers and contractors.

Treasury Cabinet secretary Ukur Yatani said he would withhold cash to notorious State ministries, departments and agencies as well as the counties after the freeze measures were relaxed in the wake of Covid-19 pandemic.

The warning comes after ministries and departments’ unpaid bills rose by Sh13.4 billion in the three months to September, hurting cash flow in firms that have suffered from reduced demand following the pandemic — which has triggered job and pay cuts.

This increased the pending bills to Sh346.2 billion in September from Sh334.2 billion in June, latest Treasury data shows.

Parastatals accounted for Sh284 billion of the unpaid bills while ministries had Sh61.7 billion from Sh48.3 billion in June.

Business owners have blamed the non-payments on mismanagement and corruption with other citing the non-payment for their collapse and auction by banks over loan defaults.

The bills grew despite the Treasury repeatedly issuing circulars, including one in August which has been followed up by another one earlier this month reminding State agencies that verified bills should be treated as first charge in expenditure.

“We are going to rein in the MDAs (ministries, departments and agencies), State corporations and the counties on the issue of the pending bills because you have no right and it’s not right at all for you to continue expending when you are not assured of the resources to settle them,” said Mr Yatani.

About Sh175.64 billion of the parastatals bills were owed to contractors, while the remainder was in form of unremitted statutory and other payroll deductions such as pay-as-you-earn taxes, medical cover and pension savings.

Section 96 of the Public Finance Management Act and Article 225 of the Constitution give Mr Yatani powers to withhold cash transfers to counties that persistently breach financial commitments.

The minister earlier last financial year withheld disbursements to some counties which had not submitted payment plans for verified pending bills.

He followed it up with a warning in June that the same measure would in future apply to ministries, departments and semi-autonomous State agencies.