Small suppliers owed up to Sh10 million by the government will be prioritised in a new plan to clear Sh206 billion historical arrears, National Treasury Cabinet Secretary John Mbadi said.
The pending bills verification committee, inaugurated November 2023, has completed verification for pending bills amounting to Sh474 billion out of Sh663 billion which was submitted.
The team, led by former auditor-general Edward Ouko, has, however, given the green light for payment of less than half (43.46 percent), or Sh206 billion, of the analysed claims, paving the way for their payment.
More than half (56.54 percent), or Sh268 billion, of the bills did not have some supportive documentation to confirm that they supplied the goods or offered the services to government institutions, Mr Mbadi says.
Citing a preliminary report from the Ouko team, Mr Mbadi said the Treasury is now exploring options to start clearing the verified supplier debts starting with firms owed a maximum of Sh10 million which form 95 percent of the claimants.
“95 percent of invoices are between Sh1 and Sh10 million. So only five percent are bills above Sh10 million. [This means the bulk of] these amounts are owed to MSMEs,” Mr Mbadi told the “Fixing the Nation” show which debuted on Monday.
“We have discussed this with the President and I think we will take this to the Cabinet so that if we have some [fiscal] space even in the supplementary budget, then we pay all bills owed up to Sh10 million …so that we can revamp people at lower strata of our economy. Then we will have a plan in the next financial year to see how we pay the rest.”
The Treasury chief disclose the value of the verified bills which are owed to the small traders.
Rising pending bills, alongside the elevated cost of borrowing, were cited for deepening the cash flow crisis for private firms, with micro, small, and medium-sized enterprises (MSMEs) being the hardest hit.
A large number of small traders who have contracts with the government have ended up being blacklisted by credit reference bureaus after falling behind on loan repayments or defaulting, hurting chances of borrowing in the future.
“For a while, the government has been getting services on loans from Kenyans and other providers of services,” Mr Mbadi said.
The arrears for the national government climbed from Sh439.2 billion in September 2022 to Sh630.6 billion at the end of September 2023 before falling to Sh528.4 billion last September.
President William Ruto pledged to prioritise payment of pending bills owed by the national government when he took power in September 2022.
“I am aware that many individuals, families, and their companies have been driven to ruin and forced to shut down, over government unpaid bills,” Dr Ruto said during his inauguration on September 13, 2022.
“We shall give priority to the expeditious resolution of our pending bills so that the government can meet its obligations and facilitate better economic performance.”
It, however, took a year to November 2023 before Dr Ruto tasked the verification team to analyse stocks of pending bills for the period July 1, 2005, to June 30, 2022. The team’s mandate, initially a year to November 2024, was last October extended by six months to March 2025.
The bulk of the debts are owed to contractors of public projects and suppliers of goods and services, with the remainder being unremitted statutory and other deductions.
These include Pay As You Earn taxes to the Kenya Revenue Authority, pension contributions to the National Social Security Fund and Local Authorities Pension Trust as well as medical cover arrears to the National Health Insurance Fund and other insurers, among other obligations.
