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Treasury has threatened to freeze additional allocations to counties and ministries that have ignored the presidential directive to clear pending bills with State suppliers and contractors.

Cabinet secretary Ukur Yatani vowed to invoke Article 97 of the Public Finance Management Act (PFMA) on December 1 that effectively blocks the funds if no effort is made to settle the bills.

Among 15 counties cited for failing to pay suppliers were Nairobi, Machakos, Mombasa, Tana River, Tharaka Nithi and Nandi, whichhave not made any effort to clear their pending bills for the fiscal 2019/20.

Others are Bomet, Vihiga, Isiolo, Migori, Kiambu, Baringo, Garissa, Narok and Kirinyaga with combined dues of Sh57 billion.

He blamed them for sitting on suppliers’ and contractors’ money for the squeezed liquidity in the economy.

First charge

“These counties have persistently failed to pay their pending bills which in practice should be a first charge on the subsequent financial year,” Yatani said, adding that their refusal to pay has resulted in the cash crunch being felt in the economy.

“Some of these suppliers have borrowed cash which needs to be re-paid. ”

Yatani also disclosed that ministries, departments and agencies (MDSs) owe suppliers and contractors Sh97 billion in pending bills. MDSs have also reported historical pending bills in prior years amounting to Sh42.7 billion.

“The delayed payment for goods and services procured by the national government MDs and county governments have led to deterioration of financial positions of businesses and in particular SMEs,” said Yatani.

But despite numerous engagements, the Treasury chief said the two levels of government have not settled the bills with amounts soaring dramatically.

It comes even as economist David Ndii says a move by the government to mop up liquidity from State corporations was ill-advised.

He argued the move to have them hand over Treasury Bonds and A-in-A revenues to the exchequer will impair cash flow of these corporations and in effect, operations and service delivery.

“The State corporations will now have to depend on the notoriously unreliable and unpredictable exchequer releases,” he said on a Twitter thread.              – Seth Onyango