In the past one year, parastatals’ pending bills have risen by Sh122 billion, worsening suppliers’ cash flow crisis, bringing into question the State’s resolve to end this persistent problem that has plunged many business people into bankruptcy.
Treasury data shows that the debt surged to Sh385.6 billion from Sh262.9 billion in March 2021. That means businesses that are reliant on the government, which is the biggest consumer, have increasingly found it hard to keep their operations going.
In turn, they have had to make tough choices such as laying off workers, reducing salaries or substantially cutting down production, all of which deny the economy much-needed tax revenue.
In an economy where businesses are yet to fully recover from the Covid-19 economic fallout, payment of the supplier debt would have been a much-needed shot in the arm for the businesses, supporting greater growth.
But the government can still redeem itself. It should stop paying lip service and implement the 2019 Treasury circular that directed ministries, departments, agencies, and parastatals to prioritise payment of debts, especially to contractors and suppliers.