Mr Yatani says in the latest quarterly budgetary filings that arrears at national level increased Sh51.7 billion, or 16.8 percent, from Sh307.8 billion in three months from March, compounding cash flow challenges for businesses.
The accumulation of pending bills intensified despite the Treasury repeatedly issuing circulars to state organisations to prioritised payment of debts, especially to contractors and suppliers.
State entities rolled over accumulated debts amounting to Sh359.5 billion from the financial year ended June 2021 to the current year, ignoring National Treasury Cabinet Secretary Ukur Yatani’s order to pay up and putting operations of small suppliers and contractors in jeopardy.
Mr Yatani says in the latest quarterly budgetary filings that arrears at national level increased Sh51.7 billion, or 16.8 percent, from Sh307.8 billion in three months from March, compounding cash flow challenges for businesses.
The accumulation of pending bills intensified despite the Treasury repeatedly issuing circulars to state organisations to prioritised payment of debts, especially to contractors and suppliers.
Mr Yatani had in his Budget Speech on June 10 issued an ultimatum to clear all verified bills by June 30, threatening to withhold disbursements to defiant entities.
“Delays in payment of pending bills to businesses who provide services to both National and County Governments has affected liquidity and operations of these entities. In a number of cases, this has led to closure of businesses and affected livelihoods of the suppliers,” Mr Yatani had said.
“I direct Government Ministries, Departments and Agencies and the County Governments to clear all their pending bills by June 30, 2021.”
Article 225 of the Constitution and Section 96 of the Public Finance Management (PFM) Act give Mr Yatani powers to withhold cash transfers to counties that persistently breach financial commitments.
The minister has since June 2020 warned that he will seek parliamentary approval for the same measure to also apply to State ministries, departments and semi-autonomous State agencies.
State corporations continued to hold the bulk of the arrears at Sh323.2 billion in June 2021, or an 89.9 percent share, a rise of Sh60.3 billion or 22.9 percent from 262.9 billion in March.
Some Sh225.92 billion of the parastatals bills were owed to contractors and suppliers, 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 for workers.
Ministries’, departments’ and agencies’ (MDAs’) bills — comprising contested invoices, court awards, land compensation and other bills—dropped to 36.4 billion from Sh44.9 billion in March.
The actual pending bills could be higher, Mr Yatani says, adding that MDAs were still submitting the arrears and that a comprehensive report will be made public in the filings for the quarter through September 2021.
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