Treasury to use Sh42b from road kitty to pay contractors

The National Treasury said it would spend Sh42 billion from the road maintenance kitty to pay money owed to road contractors. This is as it seeks to start settling pending bills owed to different firms locally.

A majority of the money, which is estimated to be over Sh650 billion, is owed to small-sized businesses, with many of them having incurred the wrath of creditors and even going under as they waited for years for the government to make good payment for the work done and goods delivered. 

National Treasury Cabinet Secretary John Mbadi said the government would divert funds from the Road Maintenance Levy Fund (RMLF) to pay contractors who have been building and maintaining roads across the country but had to go without pay.

This has in certain instances resulted in stalled road projects and abandoned sites that have put pedestrians and motorists in danger.

“In the roads sector, today, we are likely to get some resources. We are trying to utilise the Road Maintenance Levy to help solve this problem. We are likely to get Sh42 between today (last Thursday) and next week,” said Mbadi, who spoke at The Standard Group’s SpIce FM’s breakfast show, Situation Room. 

“This is going to help reduce the pending bills under the road sector.”

Mbadi also said the government is intent on clearing pending bills, saying in the 2025/26 budget, the Treasury would spend a material amount on paying mostly micro, small and medium enterprises (MSMEs).

The local private sector has been pushing for payment of the money, some of which has been outstanding for years, as a measure that would increase liquidity among firms. “We are also going to make sure that in the next budget, we factor in pending bills as an economic stimulus so that a portion of the budget that is targeting the pending bills,” said Mbadi.

He however noted that the amount owed to private sector firms could not possibly be paid within one budget cycle.

Treasury had in 2023 put in place the Pending Bills Verification Committee chaired by former Auditor General Edward Ouko.

The committee was expected to report back to the Treasury on September 30, last year, with a report on verified pending bills.

Its mandate was however extended to the end of March this year.  Mbadi said the committee had in a preliminary report indicated that it received claims amounting to Sh665 billion, of which, the committee had analysed claims of about Sh474 billion. It found only Sh206 billion worth of claims to be valid, a possible indicator that some of the claims may be fraudulent. 

“Pending bills may not be wiped out in one financial year. If you put Sh200 billion (the amount that the committee to be valid)  in our budget, you will have to stop some activities,” he said, adding that once the Committee hands in the final report, “We will embark on paying the pending bills and we will start with MSMEs.”

Mbadi explained that out of the Sh206 billion, 95 per cent of the claims are of amounts below Sh10 million, pointing to government the level of indebtedness to small businesses supplying goods and services to it. “We will give priority to these bills. We will start with the MSMEs,” said Mbadi on Thursday, but had earlier in February said the Treasury would make a provision in the second supplementary budget to pay the money owed to the SMEs.

 “We are taking a decision to make a provision in the supplementary budget II to clear these small bills owed to SMEs so that we are left with the bigger bills, which we have a strategy to pay and so we will pay a lot of pending bills in the roads sector in February which will help reduce pending bills and bring liquidity to our economy,” said Mbadi.