Kepsa wants an introduction of interest on all pending bills and hefty fines for non-compliance officers as it moves to compile the government to make it a criminal offense for government to delay payments to suppliers beyond 60 days in a fresh bid to curb rising pending bills.
This and more recommendations are contained in the summary of a recent roundtable between President Uhuru and Kepsa representatives that could boost the fortunes of many small businesses hard hit by unpaid supplies in an environment of credit crunch.
The President saw sense in their grievances and agreed to the fast-tracking of all pending payments and have a 60–day cap for payments included in next week’s Finance Bill, the summary showed.
The Finance Bill will also make it a criminal offence for any government official to intentionally divert funds meant to settle suppliers.
If adopted, this will mean business transactions between private sector and government will be settled promptly starting 2019/2020 financial year that starts next month with legal action taken against State officials who defy it.
Prompt payments are expected to inject liquidity into the economy, enhance survival for SMEs and lower non-performing loans (NPLs).
As of April 2019, Banking sector’s NPLs stood at 12.9% compared to 12.8% in February, with Central Bank of Kenya (CBK) governor Patrick Njoroge citing the State’s pending bill as part of the drivers.
“Prompt settlement of delayed payments by government and private sector entities will curtail a further increase in NPLs and support economic growth,” Dr. Njoroge said in last week’s Monetary Policy Statement.
Findings by the 2018 enterprise survey for Kenya had approximated that 12 percent of the 1,001 firms surveyed have had a contract with the government that was in arrears.
Similarly, according to a recent World Bank analysis, which warned that the government’s snail pace payment procedure was strangling the Kenyan economy by limiting liquidity flow, found out that the total value of pending bills rose from 0.9 percent of the gross domestic product (GDP) in financial year 2015/16 to 1.6 percent in the 2017/18 fiscal period.
To show good faith President Uhuru last Saturday directed that all pending payments that do not have audit queries be cleared by June 30.
The latest bid comes at a time when the private sector, already faced with credit crunch, is owed billions of shillings by the government for services rendered and goods supplied.
For instance, the 47 counties had by end of last financial year in June 2018 accumulated Sh108.41 billion ($1.084 billion) claims from contractors and suppliers, a steep climb from Sh35.84 billion the year before, according to the office of Controller of Budget data.