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Economy

Counties pay Sh33bn pending bills

Ukur Yatani.
Treasury secretary Ukur Yatani. FILE PHOTO | NMG 

Counties spent nearly a quarter of the funds they received from the Treasury between July 2019 and January 8 on paying debts to suppliers and contractors, helping to ease cash-flow challenges for companies.

Treasury secretary Ukur Yatani says some Sh33.35 billion was paid out, an equivalent of 23.98 percent of the Sh126.57 billion disbursed to the 47 units in the review period.

That helped to clear 59.28 percent of the Sh51.2 billion pending bills validated by the Auditor-General as at June 2019.

Companies last year complained 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 debts to companies for goods and services supplied, while the Treasury pegged release of funds to the counties on progress in clearing arrears to suppliers.

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Mr Yatani has maintained that release of the equitable share of revenue to the counties will depend on honouring of verified bills, offering hope to companies that the remaining Sh20.94 billion will be paid out within current fiscal year, ending June 2020.

“To ensure full compliance, significant resources have been made available to the county governments to clear their pending bills,” the Treasury CS says in the draft 2020 Budget Policy Statement, which forms the basis for the budget for the year starting July 2020.

“Processing of subsequent disbursements will be based on submission of monthly reports on payments of pending bills in line with the County Governments payment plans submitted to National Treasury and Controller of Budget.”

Section 96 of the Public Finance Management Act empowers the Treasury CS to temporarily freeze transfer of not more than half of funds to affected counties as part of corrective measures for violating prudential financial guidelines.

The freeze on disbursements to the counties has largely targeted counties that have defaulted on bills amounting to more than Sh1 billion for more than 90 days after verification.

The fate of companies which lodged payment claims to the counties amounting to Sh37.7 billion without “sufficient” documentation, as per the auditor-general’s report, remains in the balance.

“In relation to the ineligible pending bills, IBEC (Intergovernmental Budget and Economic Council) through a resolution of 18th June 2019 instructed all the county governments to establish Ineligible Pending Bills Committee to verify the bills. Once verified, it was resolved that they should be prioritised and paid within this FY, 2019/20,” Mr Yatani said.

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