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Lobby pushes for use of State bonds to clear Sh600bn bills
Kenya National Chamber of Commerce and Industry (KNCCI) President Dr Erick Rutto gives his speech during Fairtrade Global Business Summit held at Villa Rosa Kempinski, Nairobi on October 4, 2023.
Private sector lobby, Kenya National Chamber of Commerce and Industry (KNCCI) wants the State to issue a bond to clear the over Sh600 billion worth of pending bills, to speed up settlement of the debts and ease cashflows facing the traders.
KNCCI President Erick Rutto says that floating a bond offers the government a faster way of paying off contractors amid the pressure facing the Exchequer, amid mounting expenditure on payment of other critical items like foreign debt.
Those paid in bonds --which add to the public debt-- can sell the securities or hold them for interest income until their maturity.
Accumulation of pending bills across the two levels of governments has thrown businesses into cash flow woes, with the payment delays forcing businesses to close, lay off workers, freeze salary increments and halt expansion plans.
A committee set-up by the Treasury to scrutinise the pending bills is nearing completion of the exercise, setting the stage for start of the payments.
Clearance of the bills will however be staggered to minimise budgetary disruptions given the current pressure of paying foreign debt.
“KNCCI urges the government to clear the Sh626 billion pending bills by raising funds through a special Treasury bond. Securitising these debts would immediately inject liquidity into the private sector,” Dr Rutto said.
“Businesses are owed an estimated Sh626 billion in pending bills by national and county entities. The Presidential directive to pay within 90 days is often flouted, hurting contractors in infrastructure and suppliers of goods.”
Besides the national government, counties owed contractors Sh180.52 billion as at December last year.
KNCCI says speeding up settlement of the bills is key to averting further business closures besides helping to jumpstart the private sector and enable it to resume hirings.
The Treasury has recently turned to bonds to pay off local debt without further burdening the Exchequer amid the tight fiscal space.
For example, the government floated a bond to clear Sh45 billion owed to oil marketers two years ago. Another bond will also be floated in the coming months to raise Sh135 billion whose proceeds will be used to settle bills owed to road contractors.
President William Ruto last week said all pending bills will be cleared before the end of the current financial year, but doubts linger given the tight fiscal space on huge debt payment obligations that have left Treasury struggling to free up cash for other items.
The committee that has since September 2023 been probing pending bills owed by the national government will, upon completion of the verification exercise, came up with measures to avoid accumulation of the bills.
Dr Rutto added that floating a bond is key to reviving stalled projects and reigniting investor confidence for contractors seeking to do business with the national and county governments.
Entities at the national and county governments have over the years defied directives to prioritise settlement of the pending bills.
