Transaction advisor to guide issuance of pending bills bond
Tharaka Nithi county governor Muthomi Njuki briefs the media after the opening session of the Intergovernmental Budget and Economic Council on January 26, 2023. PHOTO | FRANCIS NDERITU | NMG
The government plans to hire a transactional advisor to guide the issuance of a bond to clear outstanding pending bills.
The move to be effected by the National Treasury aligns with the new administration's campaign promise which envisioned issuing a one-off Sh500 billion bond to settle the arrears.
“To remove the pressure of settling pending bills from the annual budget allocations, a transactions advisor will be engaged to advise on the securitisation of the outstanding bills subject to verification,” said the National Treasury.
The disclosure comes as pending bills continue to bedevil State agencies with the total outstanding national government pending bills as of December 31 rising by 9.5 percent in three months to Sh481 billion from Sh439.2 billion at the end of September.
The bulk of the pending bills or Sh400.7 billion is owed by State Corporations and covers payments to contractors/projects, suppliers, unremitted statutory and other deductions and pension arrears for Local Authorities Pension trusts, and others.
Ministries, State Departments and other government entities meanwhile owe Sh80.3 billion in pending bills which are mainly historical.
The prevalent bills are against a national government policy on the clearance of pending bills which continues to be in force.
The National Treasury for instance requires Ministries and State Departments to ensure carryover payments from the 2021/22 financial year are treated as a first charge against the 2022/23 budgetary allocation before entering into new commitments.
On their part, counties owe Sh25.1 billion in eligible pending bills as of December 21, according to a report by the Controller of Budget.
The devolved units nevertheless have Sh106.2 billion in ineligible pending bills.
In June 2019, the Intergovernmental Budget and Economic Council asked County Governments to establish ineligible pending bills committees to verify the bills.
President William Ruto inherited pending bills in excess of half a trillion shillings with total pending bills by the national government having stood at a historical record of Sh504.7 billion in June.
The non-payment of the bills has been an Achilles heel to the economy as businesses with government contracts end up blacklisted by credit referencing bureaus for falling behind on loan payments or defaulting on loans.
On their part, lenders have been saddled with non-performing loans as enterprises doing business with the government fail to meet repayments.
Last August, the Association of Public Sector General Suppliers began collecting signatures from members with the view to seeking legal interpretation on how the mounting pending bills would be paid by the new government.
The association had recorded arrears of Sh38.4 billion by September 1 when it was expected to file a class-action lawsuit.
Former Treasury Cabinet Secretary Ukur Yatani had persistently written circulars to government agencies with the view of unlocking the pending bills with no breakthrough.
