SECTIONS

Debt crisis: Suppliers pain of Sh49b owed in pending bills

Controller of Budget Dr Margaret Nyakang'o addressing Journalists at Zebu Resort in Narok on March 11, 2020. [Robert Kiplagat, Standard]

The National Government delayed paying pending bills of up to Sh49.24 billion in the 2021/2022 Financial Year, according to the Controller of Budget.

Controller of Budget Dr Margaret Nyakang’o in the National Government Budget Implementation Review Report 2021/2022 said the total outstanding Ministries, Departments, and Agencies pending bills stood at Sh49.24 billion, while State Owned Enterprises (SOEs) amounted to Sh448.6 billion.

The State-Owned Enterprises’ pending bills as per the review include payments to contractors, and suppliers, unremitted statutory and other deductions, and pension arrears for Local Authorities Pension Trust, among others.

The highest percentage of the SOE’s pending bills six per cent amounting to Sh26.916 billion belong to contractors and suppliers.

Dr Nyakang’o said delayed payment to suppliers and contractors adversely affects their businesses in terms of liquidity.

“At the same time, the government is negatively impacted by low revenue due to delays in tax submission and trust by the suppliers. The country’s overall economic growth is thereby negatively impacted,” reads the review report in part.

The Controller of Budget said eligible pending bills should be prioritised as the first charge in FY 2022/23 and settled without delay.

The rise in public debt was also noted to be a key issue.

As of June 30, 2022, the public debt stock as per the reviews stood at Sh8.45 trillion with 50.7 per cent due to external lenders and 49.3 per cent due to domestic lenders recording a 9.6 per cent growth from Sh7.71 trillion reported on June 30, 2021.

The Controller of Budget noted that public debt stock has grown significantly over the recent years to finance the budget deficit.

“The growth in public debt stock has, nonetheless, resulted in an increase in principal and interest repayment on both domestic and external loans. Likewise, the National Treasury continues to pay huge sums in commitment fees for several years for loans that are yet to benefit the country,” read the review report.

The allocation towards servicing the public debt in the financial year 2021/22 amounted to Sh1.17 trillion, representing 88.1 per cent of the Consolidated Fund Services budget.

The allocation towards servicing the public debt has been rising over the years. In the 2020/21 Financial Year Sh958.40 billion was allocated.

“Total expenditure on public debt during FY 2021/22 amounted to Sh847.15 billion, compared to Sh765.91 billion in FY 2020/21,” continued the report.

The Controller of Budget recommended that the Government should ensure that borrowing is only for development expenditure and at the minimum cost to keep debt sustainable. The payment of commitment fees added should be rationalised and the loans drawn down or cancelled to stem the haemorrhage.

The report raised a red flag on the declining allocations to development expenditure.

In FY 2021/22, the overall gross government budget was Sh3.46 trillion, comprising Sh688.75 billion for the development vote and Sh2.77 trillion for the recurrent vote.

An analysis of the budget performance trend over the past three years, FY 2019/20, FY 2020/21, and FY 2021/22, shows a reduction in budgetary allocation to the development budget and growth in recurrent funding. This has been attributed mainly to an increase in the Consolidated Fund Services budget, notably for public debt.

Development expenditure it was also revealed has also shown a decline in the overall expenditure of the development budget, while the recurrent budget has recorded growth.

In the report, the National government development expenditure recorded a 1.4 per cent decline from the Sh561.49 billion spent in FY 2020/21.

A review of the recurrent expenditure indicated that Sh506.29 billion was spent on compensation to employees.

The Teachers Service Commission (TSC) recorded the highest expenditure on compensation to employees at Sh270.24 billion.

The Controller of the Budget said the government should focus on growing the development budget to hasten economic development in the country.

“To curb the growth in public debt, the government should implement strategies to improve revenue collection at the national level and among the Counties. This will go a long way in ensuring adherence to the public finance principles on fiscal management,” stated the Controller of Budget.