Contractors and suppliers to the government have started slapping agencies, holding huge pending bills with penalties, which is likely to present a new headache for the government.
The latest Controller of Budget (CoB) report shows that during the year, the suppliers slapped 13 agencies with penalties and interest totalling Sh21.5 billion in the fiscal year ending June 2024.
Close to three-quarters of the penalties have been charged to four agencies in the road and transport sector, where projects valued at billions of shillings have stalled due to budget cuts, the CoB report shows.
With penalties totalling Sh9.7 billion, the Kenya Rural Roads Authority (KeRRA) has the heaviest burden, followed by the Kenya National Highways Authority (KeNHA), which has penalties and interest on pending bills totalling Sh4.9 billion. In contrast, the Nairobi Metropolitan Area Transport Authority has Sh754.5 million.
The Kenya Urban Roads Authority (Kura) had penalties totalling Sh369 million by the end of June.
“The total national government pending bills as of June 30, 2024, amounted to Sh516.27 billion, compared to Sh622.82 billion reported as of June 30, 2023,” said Controller of Budget Margaret Nyakang’o.
The report notes that state corporations bore the heavier side of the burden with pending bills totalling Sh379.8 billion, which explains the reason why they are the casualties of the penalties and interest.
Other agencies slapped with heavy penalties and interests include the National Oil Corporation of Kenya (Sh3.59 billion), Kenya Power (Sh981.8 million), and the Pyrethrum Processing Company of Kenya ( Sh778 million).
In terms of stock of principal pending bills, KeNHA had the highest debts at Sh86 billion, followed by KeRRA (Sh56 billion) and Kenya Power (Sh15 billion).
During the year, bills owed by ministries, departments and agencies were reduced by Sh42 billion to hit Sh136 billion by the end of June 2024.
“The highest percentage of the State corporations’ pending bills (Sh235 billion as of June 30, 2024) was for contractors/projects at 62 percent, followed by pension arrears at 13 percent,” the report notes.
In March, the CoB approved the withdrawal of Sh3 billion for settlement of pending bills after the Treasury requested to spend Sh10.9 billion.
The CoB also said she approved the withdrawal of Sh363.6 million from the Equalisation Fund.
“The amount comprised Sh207.5 million for the Equalisation Fund Secretariat’s recurrent expenses and Sh156.14 million for development expenditures.
“The development expenditure went towards payment of pending bills under the Ministry of Water and Sanitation based on the first policy criteria for identifying marginalised counties,” said Dr Nyakang’o.
The report notes that during the year, pending bills amounting to Sh592.4 million were declared ineligible.
For several years now, businesses across the country have been complaining that billions of shillings in contracts performed with different national and county government agencies have been stuck with the government.
The Treasury continues to struggle with cash flow challenges that have seen it continue with delays to release funds meant for projects and procurement, risking further growth of the pending bills.
A Central Bank of Kenya survey in July captured company executives expressing the need for the Treasury to release funds to counties and agencies promptly as a key intervention for the continued sustenance of businesses.
