The Public Accounts Committee (PAC) has questioned the move by the government to float a road bond meant to clear a Sh100 billion debt that the State Department for Infrastructure owes various contractors in pending bills.

During a meeting between the PAC chaired by Ugunja Member of Parliament Opiyo Wandayi and Infrastructure ministry which was represented by Principal Secretary Prof Paul Maringa, the lawmakers said the decision will hurt the economy due to Kenya’s current tough financial situation.

Committee members  who included Aden Duale (Garissa Township MP) and Joseph Ngugi (Gatanga MP) said it was suspicious that while the ministry had failed to deal with pending bills, it was now being forced to use other means to clear the debts.

Wandayi said the decision by the government is not proper due to the country current financial situation, coupled with pandemic shocks.

“Why would you initiate new projects while the old ones have not been completed?” Wandayi said.

Borrowing to repay debt

Duale claimed that the failure by the state department to plan properly had led to the accumulation of pending bills in the minstry.

“This is poor planning, PS. You cannot keep on advertising for new roads when you already have Sh100 billion that you haven’t cleared,” he said.

Ngugi sought to know why the state department did procurement without a budget, which is contrary to the Public Finance Management (PFM) Act, said that borrowing to repay a debt has never been good economics.

The statements by the MPs came after Maringa who had appeared before the committee to respond to queries for the financial year 2018/19 as raised by Auditor-General Nancy Gathungu told the MPs that unless they float the bond the department will not be able to clear the pending bills.

Maringa told the MPS that the National Treasury, Central Bank of Kenya (CBK) and the Office of Attorney-General have already approved the decision.

Currently, the country’s debt situation falls shy of the Sh9 trillion debt ceiling enacted in 2018 by some Sh1.4 trillion.

Maringa said that the bond is necessary to retire the Sh100 billion so as to avoid the risk of attracting huge interests and penalties.

“Unless we float the bond, we may not be able to say when we will be able to clear the pending bills,” said Maringa.

“We must borrow money. We started with Sh90 billion as pending bills before increasing to Sh100 as at June 30, 2019,” he added.

Prof Maringa who regretted that inadequate budgetary allocations and cutbacks are to blame for the accumulation of pending bills accused the banks of aggravating the situation by slashing government money held in accounts that is intended to pay contractors just because the government is yet to clear loans.

Pending Bills

The move comes even as it emerged that the State Department’s pending bills may be in excess of Sh200 billion for the 2018/19 and 2019/20 financial years combined.

The PS told the committee that in the previous financial year, pending bills amounting to Sh70 billion led to the government paying Sh5 billion in interest and penalties.

The PFM Act provides that before an entity of the government does any procurement, it must have a budget.