With a commitment to transparency, the Ruto administration is making a significant move by declaring its dedication to the public disclosure of State Ministries, Departments, and Agencies (MDAs), as well as parastatals, that fall behind on payments for supplied services or goods. This surge in arrears reached an unprecedented amount—Sh631 billion—within just one year under the Ruto administration; this recent decision is, therefore, not without cause.
Years of undisclosed information about national-level defaulters have fueled public discontent and triggered an urgent call to action. Although authorities regularly publish quarterly reports on each county’s pending bills, they often present data related to MDAs and state-owned enterprises (SOEs) in a cumulative manner without offering a detailed breakdown.
Contributors to the 2023 draft Budget Review and Outlook Paper (BROP) channeled the public’s frustration, insisting on incorporating measures to address pending bill accumulations by ministries and parastatals. In response, Tuesday’s published final report of BROP acknowledged this recommendation; furthermore, it reassured that the government would consider including information about MDAs’ as well as SOEs’ pending bills in upcoming budget documents.
Fresh data reveals a staggering increase in pending bills held by national government entities, making the urgency for transparency evident. These arrears surged over the 12 months through September with a growth rate of Sh191.4 billion; this marks the fastest uptick since their public disclosure five years ago.
The Treasury’s data reveals a disquieting trend: national government arrears ballooned to Sh630.6 billion by September 2023, an increase from just Sh439.2 billion—the debt Dr. Ruto inherited upon assuming office a mere year prior. More detailed breakdowns show that State-Owned Enterprises (SOEs) accrued bills jumped significantly by 42.73%, totaling at Sh509.4 billion; similarly, debts within Ministerial Departments and Agencies (MDAs) surged up by 47%. This surge led them towards an overall balance of over Sh1212 million dollars in debt, which is quite substantial for these entities’ financial health.
A noteworthy point worth mentioning here—historically speaking—is that many MDAs have not been forthcoming about their outstanding obligations or ‘arrears.’
Despite President Ruto’s commitment to prioritizing the payment of pending bills and his recognition of their adverse impact on small- and medium-sized businesses that supply goods and services to the government, an increase in these overdue invoices persists. In Dr. Ruto’s inaugural address on September 13, 2022, he verbally acknowledged the hardships borne by individuals, families, and companies because of outstanding governmental debts; furthermore, pledging swift action for their resolution.
Amounts owed to public project contractors and goods-service suppliers primarily constitute the debts, with unremitted statutory deductions and other encumbrances making up the remaining portion. These financial obligations encompass taxes such as Pay As You Earn, pension contributions, arrears for medical coverage, among others.
Dr. Ruto, chairing a Cabinet meeting in June to tackle the fiscal challenge, resolved actively: Establish a special committee—its task being auditing pending bills from 2005 through 2022. The committee operates on an allotted time frame of one year; within this period, it presents not only its findings but also proposes mechanisms for preventing future accruals of pending bills.
These mounting debts have consequences that ripple beyond the financial realm: many businesspeople confront blacklisting by credit reference bureaus, a situation that detrimentally impacts their creditworthiness and compromises future borrowing prospects. The committee plays an essential role—it proposes a mechanism to halt impending bills—in safeguarding economic stability.
Kenya, grappling with a fiscal dilemma, takes steps towards addressing the root causes and fostering an accountable financial system by committing to transparency. Unveiling defaulters signals a renewed effort; an active confrontation against challenges that have plagued the nation’s fiscal landscape for far too long.