EDITORIAL: Heed calls on clearing pending bills quickly

Ideas & Debate

EDITORIAL: Heed calls on clearing pending bills quickly

Monday, November 25, 2019 22:00

By EDITORIAL

Reports that public entities are holding more than Sh200 billion in overdue debts owed to private contractors and suppliers, is to say the least, is as baffling as it is unconscionable. To start with, getting to the point of doing business with government entities is an accomplishment that only a limited number of firms experience in their life cycles given the rigours of the public procurement process.

Given this scenario, how counties, government ministries, departments and agencies (MDAs) ever get to the point of denying private sector such a colossal amount of cash in an economy the size of ours is mindboggling.

According to the National Treasury, the 47 counties crossed into this financial year with pending bills amounting to Sh108.4 billion while the MDAs had Sh82.7 billion, in large part explaining why the economy is starved of cash and businesses are closing down due to cash flow constraints.

This is why small businesses in financial distress are blaming counties and MDAs for their cash flow woes, yet it is common knowledge that paying firms promptly for goods and services delivered has a way of releasing creative energies and keeping people in their jobs across the value chains.

That is why we add our voice to the growing calls on government entities to clear all the legitimate pending bills before close of the calendar year. The economy cannot function normally when those doing business with public entities are not certain of their cash flows.

The Executive’s directive that pending bills be the first charge on budgets can be a good start if implemented but public entities have largely ignored it whenever they receive cash from the Consolidate Fund. It is encouraging that the Treasury has resorted to radical measures such as withholding some allocations for the counties that have failed, or are unwilling to pay off their debts.

The National Assembly should also speed up debate on the bill seeking to create a legal framework for punishing firms and public agencies that delay payment for goods and services supplied by small business.

If it could have its way, the private sector which has been vocal about pending bills, would have as a criminal offence the act of delaying payment by more than 60 days or 90 days, and even have such overdue debts attract interest charge.

In short, government agencies should listen to the counsel of the World Bank which has all warned that rise in public pending bills strangles the economy by limiting liquidity flow and profitability of firms doing business with the State.