Public entities will pay interest calculated at the Central Bank base rate for late payment to suppliers of goods and services if Parliament passes a new Bill into law.
The Prompt Payment Bill, 2020, requires that a procuring entity shall pay for the goods, works or services provided by the prescribed payment date.
“Failure to pay the amount due within the stipulated time, a procuring entity shall be liable to pay an interest calculated on the basis of the Central Bank base rate,” the Bill, cosponsored by Senators Farhiya Haji and Jonson Sakaja states.
In last month’s meeting, the Monetary Policy Committee made a 25-basis point cut in the base rate, to seven percent from 7.5 percent, which marked the fourth straight cut in the rate since the November 2019 meeting.
The Bill comes at a time county and national governments are struggling to clear huge debts owed to suppliers of goods and services.
Counties owed Sh51.2 billion in pending bills as of June 2019.
Firms last year complained of accumulating pending bills amid credit rationing by commercial banks because of interest rate capping that had forced them to put on hold investment and expansion plans, hitting creation of jobs for the rising unemployed skilled youth.
President Uhuru Kenyatta consequently directed ministries, departments and agencies to prioritise payment of the pending bills.