Treasury CS Mbadi proposes new budgeting system to clear Sh600bn pending bills

Treasury Cabinet Secretary John Mbadi has revealed plans to propose a new system to Cabinet aimed at gradually clearing the country's massive backlog of pending bills, which currently stands at over Sh600 billion.

Speaking during a stakeholder meeting chaired by Prime Cabinet Secretary Musalia Mudavadi on Thursday, Mbadi stressed the need for a more accurate and realistic approach to budgeting to prevent future unpaid bills.

"To deal with pending bills, we first need to deal with the budget. It's not about prompt payment. We have to deal with pending bills at the budgeting stage," Mbadi explained.

"We have to be realistic in our budgets. Counties must stop over-projecting own-source revenue. The national government must stop over-projecting revenue collection," he added.

The CS said that the total pending bills, currently estimated at Sh663 billion, could potentially decrease to around Sh450 billion after a full verification process.

However, he pointed out that Sh151 billion from the previous financial year had already been carried over, which means the final total will likely remain above Sh600 billion.

A significant portion of this debt is concentrated in the road sector.

Stimulus plan

Mbadi's proposal includes the development of a system akin to a stimulus plan, designed to help settle these outstanding bills over time.

He insisted that the root cause of the current backlog lies in unrealistic revenue projections by both national and county governments, which have contributed to the piling up of unpaid bills.

In moving forward, Mbadi aims to encourage a shift in how budgets are planned, ensuring that both levels of government adopt more accurate revenue forecasts.

This, he believes, will not only address the ongoing issue of pending bills but also pave the way for more sustainable financial management in the future.

In June 2023, the Cabinet approved the establishment of a special committee on pending bills. The Pending Bills Verification Committee was tasked with the auditing of liabilities for the period between 2005 and 2022.

The committee consisted of the Attorney General, the State Department of Roads, the State Department of Public Works, the State Department of Housing and Urban Development and the Public Procurement Regulatory Authority.

Others included the Ethics and Anti-Corruption Commission, the Law Society of Kenya, the Institute of Engineers of Kenya and the Institute of Certified Public Accountants of Kenya among others.

The Committee was to examine and submit interim reports to the treasury cabinet secretary upon verification that the government would honour the obligation in question.

The move was aimed at establishing the integrity of all bills and cushioning small enterprises against liquidity inadequacies.