MPs moot bond plan to settle piling pending bills

National Assembly's Budget and Appropriations Committee chairman Kanini Kega. [Kelvin Karani, Standard]

MPs want the National Treasury to float a long-term bond to raise funds to settle billions of shillings in pending bills to suppliers in a move likely to raise the country’s public debt to new highs. 

The proposal is contained in the Budget and Appropriations Committee’s report on the country’s spending plan for the 2021/2022 financial year that will be tabled in the National Assembly later this morning.  

“That the National Treasury sets up a fund that may be financed through a long-term bond for the payment of the existing verified pending bills and court awards,” says the committee chaired by Kieni MP Kanini Kega in its report.

“The fund should be in place by October 1, 2021.” 

The committee said pending bills remain a major headache in the Government’s budget cycle, eroding resources for development expenditure and increasing the number of stalled projects.

An audit conducted by the Auditor General on behalf of the National Treasury in 2018 indicated that both the central and county governments owe suppliers more than Sh225 billion dating back several years.

The National Government owes a total of Sh137 billion, including Sh42 billion in historical debts owed by several State departments and authorities. Counties, on the other hand, are said to owe more than Sh100 billion, including payments to the Kenya Medical Supplies Agency (Kemsa), as well as unpaid electricity and water bills.

“Pending bills and stalled projects continue to present a significant challenge in almost all sectors of the budget,” said House committee.

The State Department of Infrastructure, for example, is estimated to hold Sh85 billion worth of pending bills and 88 stalled projects.

The State Department for Regional and Northern corridor development for its part, holds Sh6.3 billion in overdue payments, including Sh2.9 billion relating to the controversial Lake Basin Development Authority mall that has accumulated Sh1 billion in interest payments as of this year and 24 stalled projects. 

The Ministry of Defence has itself accumulated pending bills amounting to Sh8.1 billion. 

“The government is currently facing legal challenges with financial risks to the tune of Sh1.2 trillion,” said the report.

“In addition to this, pending payments for awards against the government currently stand at Sh160 billion and gathering interest.” 

If actualised, the bond would send the National Treasury back to the capital markets to raise funds to offset tens of billions of payments even as the country’s debt hits new highs. 

As of March this year, Kenya’s public and publicly guaranteed debt stood at Sh7.3 trillion, representing 82 per cent of the Sh9 trillion national debt ceiling, with Parliament warning this might have to be widened if the government is to meet its spending objectives.