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Economy

Heat turned up over parastatal bills

Ukur Yatani
Acting Treasury Secretary Ukur Yatani. FILE PHOTO | NMG 

The Executive has turned its guns on the parastatal bosses as debts owed by public entities to contractors and suppliers balloon to Sh200 billion.

Just days after acting Treasury Secretary Ukur Yatani announced the withholding of equitable revenue shares of 15 counties over pending bills, President Kenyatta’s administration is mulling drastic measures on heads of ministries, departments and agencies (MDAs) with huge debts.

For a start, every Cabinet Secretary was last week asked to prepare and present a list of all parastatals under their ministries and the pending bills settled so far.

“Every one of us had to carry a list with up-to-date records on which parastatal owes how much and how much is still pending. There is a lot of pressure about it and it has now been elevated to the Cabinet secretaries to push their parastatals to pay as soon as possible,” the source privy to last week’s Cabinet meeting told the Business Daily.

Last week, Mr Yatani disclosed that the 47 counties have accumulated debt totalling Sh108.41 billion from the previous financial year, a steep climb from Sh35.84 billion the year before. The MDAs on the other hand have reported historical pending bills amounting to Sh82.7 billion.

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Both the private sector and Central Bank of Kenya have warned that the huge mountain of pending bills is hurting economic recovery.

According to the Kenya Private Sector Alliance (Kepsa) Chief Executive Officer Carole Kariuki, a number of Small and medium-sized enterprises have gone under due to unsettled payments. “There needs to be a clear and predictable framework for settling debts owed by the public entities,” she said in an earlier interview.

President Uhuru Kenyatta in his June Madaraka Day address directed that all State agencies to make quick settlement of pending without audit queries by end of the financial year (June 30), and urged the 47 counties to follow suit.

Last week, Mr Yatani said the Treasury had released Sh65 billion to county governments by June 30, 2019 as part of the final disbursement on the understanding that the devolved units would utilise the funds to pay off pending bills.

“Fifteen county governments have not made any efforts to clear their pending bills in the 2019/2020 financial year. Their reported eligible pending bills have remained static between July 1 and October 31, 2019 and are sadly holding a huge proportion of the pending bills,” CS Yatani told parliamentarians.

The 15 counties are Machakos, Narok, Isiolo, Nairobi, Vihiga, Tana River, Migori, Tharaka-Nithi, Nandi, Kirinyaga, Bomet, Mombasa, Kiambu, Garissa and Baringo.

The World Bank (WB) in its latest country economic update report warned that the persistent rise in public pending bills is strangling the economy by limiting liquidity flow and profitability of firms doing business with the State.

A 2018 enterprise survey for Kenya found that approximately 12 percent of the 1,001 firms surveyed have had a contract with government that was in arrears, signalling the impact on delayed payment to suppliers on the overall economy.

The total value of pending bills increased from 0.9 percent of the gross domestic product (GDP) in financial year 2015/16 to 1.6 percent in the 2017/18 fiscal period, according to WB analysis.

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