The government has committed to be paying suppliers within 60 days and proposed penalties for all entities that delay payments.
The move gives a boost to companies that do business with the State.
Pending bills have made it difficult for businesses to operate, in many cases killing debt-ridden small and medium enterprises.
“Going forward, the National Treasury will endeavour to ensure that payments to suppliers of goods and services to the National Government are made within a maximum of 60 days,” said Treasury Secretary Henry Rotich yesterday.
This, he said, will support Micro- Small- and Medium Enterprises (MSMEs) and the business community, leading to improved liquidity to suppliers and contractors. Counties will also be expected to adhere to this proposed policy once it is approved by Parliament.
If adopted, this will mean business transactions between private sector and government will be settled promptly starting July with action taken against state officials who defy it.
The 47 counties had by end of last financial year in June 2018 accumulated Sh108.41 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.
Yesterday, Mr Rotich said the State has reviewed all existing pending bills as was recently directed President Uhuru Kenyatta and that Sh10.9 billion of verified pending bills will be paid before end of this month.
“This should eliminate most pending bills owed to the youth, women and persons living with disabilities under the Access to Government Procurement Opportunity,” the CS told MPs.
The state also wants to reign on private businesses that do not pay suppliers on time. Mr Rotich said government has received numerous complaints relating to late payment, and even non-payment of suppliers by businesses and contractors who enjoy relatively superior bargaining positions.
Yesterday, Mr Rotich proposed amendments to the Competition Act to empower the Competition Authority of Kenya (CAK) to deal with abuse of buyer power and ensure prompt payment to suppliers.
“The proposed amendments shall also provide for penalties for infringement of these provisions,” said Mr Rotich.