Treasury Warns Against Taking Fresh Loans to Clear Bills

The Treasury has shot down a resolution by lawmakers to borrow more money to clear accumulated arrears to suppliers and contractors as well as court fines. The treasury argued the move would burst the country’s Sh9 trillion debt ceiling.

Treasury Cabinet Secretary Ukur Yatani says Kenya has no room to borrow more than Sh500 billion to clear pending bills for goods and services rendered as well as court awards for contract breaches, unlawful dismissals, and human rights violations.

The Budget and Appropriations Committee of the National Assembly had last June resolved that the Treasury set up a special fund to be financed through long-term debt. The special fund was to pay off verified pending bills and court awards.

“Payment of existing pending bills and court awards through the issuance of long-term bonds may not be tenable at the moment given the prevailing fiscal environment in view of the magnitude of these bills,” Mr. Yatani wrote in the Supplementary Budget Report he tabled in the House on Tuesday for approval.

The latest data shows arrears to suppliers and contractors as well as unremitted statutory and other deductions such as payroll taxes, pension, and medical cover by State entities at the national level stood at Sh423.1 billion last September.

Court awards as a result of unlawful decisions made by government officers, on the other hand, were estimated at Sh111.99 billion last June. Meanwhile, counties had Sh41.61 billion in arrears since the last audit for the financial year ended June 2018.

The Treasury insists the arrears be settled gradually through annual budgetary allocations. These allocations will be treated as priority payments in line with a presidential directive in June 2019.

“Creation of a fund for such a purpose will require clear justification as provided for in section 2017 (b) of PFM (Public Finance Management) Regulations 2015 which oblige that the functions and other public services to be delivered through a fund should be those that cannot be delivered through the structure of budget appropriations,” Mr. Yatani says.