The consequences of unpaid bills to individual government suppliers are significant as they cause significant harm to firms, who often have to take loans to acquire materials and pay for labour.
Moreover, there have been concerns over the widespread economic effects of these arrears which cause large-scale ripple effects as shutting down of businesses reliant on these unpaid invoices for revenue leads to losses of jobs, an increase in non-performing loans for lenders, and poverty increases.
Read: How Poor Health Affects The Economy Of A Country
Subsequent slowing down of economic growth as a result of these effects is part of what the treasury terms as a financial risk due to the ability of these pending bills to derail the government’s economic plans.
The National Treasury intends to issue a one-off Ksh. 500 billion bond to settle arrears owed and the consequent paying of all arrears could provide massive benefits by undoing some of these ripple effects while providing some positive ones.
Read:Ruto Reveals Amount Owed By Government In Pending Bills
An increase in cash flows into business in the form of settlement of arrears owed by the government would stimulate economic growth by securing jobs by preventing the insolvency of small companies dependent on procuring services to government agencies, with the added benefit of reducing non-performing loans by these companies, which improves the credit profiles of SMEs.
As securitization looms for these arrears, a glimmer of hope exists for those that await payment for goods and services procured for government agencies. Ensuring these Kenyans are paid what is due to them would be good not just for them, but for the economy at large
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