Treasury considers a Mini Budget to ay the $641 Billion in Unpaid bills

The Treasury will lay out its strategies for paying the Sh641 billion in bills that the government owes suppliers and contractors in a memo to the Cabinet that will be presented the following week.

Chris Kiptoo, the principal secretary of the Treasury, reported to the National Assembly’s Budget and Appropriations Committee (BAC) that State corporations owe county governments Sh160 billion in debt, Sh407 billion to suppliers and contractors, and Sh18.3 billion to ministries, departments, and agencies.

He stated that the formation of a multi-agency team to examine the enormous unpaid bills and create a budget for debt repayment by September of this year is anticipated to receive approval from the Cabinet.

Members of the Treasury, Auditor General, Ministry of Roads, Public Works and Housing, Public Procurement Regulatory Authority (PPRA), and Ethics and Anti-Corruption Commission (EACC) will make up the multi-agency team.

The Law Society of Kenya (LSK), the Institution of Engineers of Kenya (IEK), and the Institute of Certified Public Accountants of Kenya (ICPAK) will all have representatives on the pending bills team.

“The Cabinet memorandum will be submitted to the Cabinet next week. By September, we need to have done a review on all pending bills and provide a budget that clears all outstanding payments to suppliers and contractors,” Dr Kiptoo said.

In order to respond to inquiries that came up during the examination of the 2023–24 budget estimates, he appeared before the BAC, which was presided over by Kiharu MP Ndindi Nyoro.

According to Mr. Nyoro, numerous ministries, counties, and State corporations have sizable unpaid bills.

“Pending bills are increasing when the Constitution and the Public Finance Management Act require that pending bills shall form the first charge on the budget of the concerned government agency in the subsequent financial year,” Mr Nyoro said.

According to Dr. Kiptoo, the Treasury will create a supplemental budget to pay off all outstanding bills that are later found to be due.

“After we clear all the outstanding bills, pending bills that will arise in the financial year 2023/24 will form the first charge after next June. We will be very strict as the National Treasury to those entities that do not clear pending bills in the financial year that they arise,” Dr Kiptoo said.

Last month, President William Ruto alleged that the previous administration had concealed more than Sh200 billion in unpaid bills from the current budget.

“When we came to office we found they had not factored about Sh130 billion of pending bills and almost Sh90 billion that was meant to be given to the counties,” Dr Ruto said.

As of December of the previous year, at least 160 State corporations had accumulated a total of Sh408 billion in unpaid bills, of which Sh166.99 billion were unpaid contractor dues and Sh115.7 billion were owed to suppliers.

The growing backlog of unpaid bills—which as of December of last year totaled Sh646.8 billion—was blamed on allegations of payments to suppliers being diverted, and the Parliament launched investigations into these claims in February.

The County Public Investments and Special Funds Committee (CPISF) was informed by Margaret Nyakang’o, Controller of Budget (CoB), that the headache caused by unpaid bills was made worse by payments being diverted from legitimate payees to other suppliers who were not included in the payment schedules.

“Some of the key reasons for the huge pending bills is the diversion of payments from the rightful payees to others who are not in the list that I authorise for payments,” Dr Nyakang’o told the committee.

She informed the committee that individuals who are responsible for paying suppliers at both the federal and state levels of government as well as parastatals occasionally removed transactions, they believed did not serve their interests and left them as unpaid bills.

After the CoB approves withdrawals from the exchequer, she cited a lack of automation as the reason why her office did not have a “full view” of the transactions.

The CoB lacks real-time access to the accounts, which is a flaw that counties take advantage of to pay contractors unfairly and file fictitious claims.