Budget experts fault Ruto's plan on Sh794b pending bills

National Treasury PS Dr Chris Kiptoo before the National Assembly's Finance Committee at the Parliament buildings, Nairobi on February 22, 2024. [Elvis Ogina, Standard]

Budget experts at Parliament have faulted the Kenya Kwanza government’s road map to pay off the mountain of pending debts, which currently stand at over Sh500 billion.

The Parliamentary Budget Office in a new report suggests the current plan may not help fully end the menace of the pending bills. The settlement of the arrears amounting to five per cent of GDP or Sh794 billion is expected to inject liquidity into the private sector, thereby stimulating productivity.

The parliamentary unit now wants the government to provide a dedicated new kitty of Sh150 billion each financial year to settle pending arrears for the next five years on a first-in (incurred) and first-out (settled) basis. This could be created through a mix of ordinary revenue and concessional-based instruments to manage liquidity pressures and smoothen cash flow needs for the indicated period, it says.

The budget office also says priority settlement should be given to suppliers with verified pending bills and unremitted but deducted statutory obligations such as outstanding Pay As You Earn (PAYE), pensions, Sacco contributions and staff loans. 

The unit headed by Dr Martin Masinde says its proposed options are designed to foster “fiscal responsibility, transparency, and efficiency while supporting inclusive economic growth.” 

“(Government should also) reserve a maximum of 20 per cent of vote allocation within budgets for clearing pending bills (and) introduce a rule-based legal regime to identify, quantify, and report on all types of pending bills and commitments as well as provide specific sanctions curtailing accumulation of pending bills,” says the unit. At the same time, the budget experts have urged for the amendment of the Public Financial Management Act (2012) for enhanced disclosures relating to pending bills during budget approvals. “This may be in the form of a template to be submitted alongside each proposed sector budget,” they say.

“Provide disclosures on pending bills in the fiscal framework to reflect more accurately the fiscal position and operations of the national and county governments.”

The experts are also calling for the amendment of the Unclaimed Financial Assets Authority Act to provide for tracking, settlement, and reunification of unclaimed but eligible pending bills across the public sector.

It emerged recently that contractors and suppliers providing goods and services to the National Government will experience a prolonged delay in receiving over Sh567 billion owed to them.

This is after the National Treasury said officials tasked with auditing the outstanding bills before any of the long-awaited payments can be initiated will complete the assignment in March.

The massive debts have been blamed for crippling enterprises that are doing business with the National Government and the devolved units.

“I would like to further assure you that we are committed to meeting the deadline of every milestone with the first interim report expected in March,” said Treasury Principal Secretary Chris Kiptoo on January 31.

He spoke when he announced the official start of the verification exercise of the bills from all government ministries, departments and agencies. Over the years, suppliers have spoken of untold suffering, including being auctioned and their livelihoods destroyed for doing business with the government. Some contractors told The Standard they were disappointed with the slow pace of payouts. “The process has been very slow yet the pain continues. We have lost all our properties to bank auctions and we need a speedy solution,” said one contractor, who sought anonymity to speak freely.

“Doing business with the government should be classified as one of the many ways to die in Kenya because payment is difficult and takes ages,” said another supplier who also sought anonymity for fear of victimisation. 

The government established a Pending Bills Verification Committee headed by former Auditor General Edward Ouko in late June last year with the approval of Cabinet. Its operationalisation was, however, beset by delays as it was only gazetted in late September last year. Its mandate is to formulate a strategy to verify the stock of pending bills outstanding at the end of June 2022.

It is also expected to address the weaknesses in the Public Financial Management (PFM) systems that led to the accumulation of pending bills, and finally clear the verified stock of pending bills. According to Dr Kiptoo, as of January this year, the committee had received 1,537 claims from 38 ministries, departments and agencies amounting to Sh145.5 billion.