The government has through the National Treasury promised to clear outstanding supplier bills by the end of the month as part of its renewed efforts to ease the ongoing cash crunch in the economy.
While addressing a press conference on Monday, Chairman to the National Development Implementation and Communication Cabinet Committee Fred Matiang’i said the National Treasury gas now enforced adequate provision to see off the long-standing dues.
“There are areas where pending bills have strangled some businesses. We are satisfied of the progress being made. We have committed to the private sector of staying on this path so as businesses can grow,” he said.
The private sector meanwhile expects honesty and transparency from government in dealing with the myriad of issues which also encompass tax administration and the competitiveness of locally produced goods and services.
“There is a long list of issues that have been with us for a long time. The government has been clear that it neither wants to keep hearing of this issues nor should anyone act surprised,” Kenya Private Sector Alliance (KEPSA) Chairman Nick Nesbitt said.
Ironically, the national government alongside counties are yet to clear the first-charge items from their registry, three months into the 2019/20 financial year in spite of the issuance of Ksh.232.5 billion in net exchequer issues to ministries and counties in the first quarter.
As of June 2019, the State owned suppliers a total of Ksh.64.7 billion with the majority of the debt sitting in the development basket.
The net sum owned to businesses could however been higher from the accumulation of bills from previous reporting periods.
Earlier this year, the Office of the Auditor General audited and verified a sum of Ksh.40.5 billion in pending bills from counties, but payments for the majority of the bills remain unaccounted for with the Controller of Budget (COB) and Treasury yet to publish their respective quarterly budget reviews.
The impact of the non-payment of pending bills is mirrored in the deterioration of private sector growth sentiments as expectations on future output fell to year to date lows in October according to research from the Stanbic Purchasing Managers Index (PMI).
“Private sector activity was softer in October as firms again lament what they term as ‘cash-flow’ issues,” said Stanbic Bank Regional Economist Jibran Qureishi.
The clearing of the outstanding supplier monies is expected to create stimulus for private sector recovery flanked by the recent lift to interest rate caps.
Further, the settlement of bills is set to unlock demand while bringing down banking sector non-performing loans (NPLs) levels which hit a high 12.7 percent in June.
Other interventions to prop up the sector have included the reduction of Value Added Tax (VAT) refunds from six percent to two percent under amendments contained in the Finance Act, 2019.
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