The National Treasury has moved to block the approval of budgets to state entities with no action plans for settling their pending bills.
In a memo to state-owned entities, Cabinet Secretary Ukur Yatani said there have been numerous reminders to the institutions to prioritise settlement of pending bills.
“The National Treasury will not grant or recommend for approval of budgets of state corporations with no remedial action to address the accumulation of pending bills,” he said.
The Treasury wants the state corporations in default of loan repayments to initiate budget cuts and slow down on new projects.
Additionally, Yatani directed accounting officers to take necessary steps to ensure that pending bills, interest accrued and principal loan are the first charge of the revenue.
“Accounting officers were also reminded that accumulation of confirmed and verified liabilities and pending bills is prohibited and may invite punitive actions against those responsible,” read the memo.
The CS has further warned the agencies against using the budget exercise as a resource bidding process saying those with projects align the same with line ministries during sector working groups.
The Treasury has maintained that there will be cuts on travel, training, seminars, consultancies, legal expenses and overtime so as to contain the spending spree at the state agencies.
“State corporations should, as a matter of priority, enhance cost control measures with the aim of delivering services in the most cost-effective manner.
Those in contravention of the directive will be held liable for such expenditures in accordance with the Public Finance Management Act, 2012.
This comes after the Controller of Budget’s report showed that state entities have continued to allow bill to pile up despite decrees and warnings.
The budget implementation review report for the first quarter of 2021-22 fiscal years the national government owes suppliers and contractors Sh376.08 billion.
Out of the total outstanding debt, Sh322.2 billion is owned by state corporations while the ministries and departments account for Sh52.88 billion.
Updated data availed by the National Treasury for MDAs shows that pending bills as of June 30, 2021 stood at Sh56.78 billion and Sh3.80 billion was paid in the first three months of the FY 2021/22.
The debt for the ministries and departments excludes Sh100.15 billion that was considered as ineligible after the verification of the pending bills.