The government has suspended all payments owed to various individuals and entities until further notice, as it marshals resources to deal with the Covid-19 pandemic.
The announcement comes as the infected cases hit 81 Wednesday.
Controller of Budget (CoB) Margaret Nyakango said in an internal memo to her staff that only salaries of government employees will be processed.
“This is to inform you that the National Treasury and Planning has put on hold all commitments, payments and claims as the country assesses the resource requirements for Covid-19 interventions,” said Dr Nyakango in the memo dated March 31.
She noted that: as you are aware, Covid-19 has come with requirements not initially anticipated in the budgets. For that reason, after establishing the costs, our budgets will be reorganised through a supplementary budget in line with the PFM Act. My internal memo was done in the spirit of informing staff of the goings-on, a promise that I made to them earlier.”
The move comes after the Institute of Certified Public Accountants of Kenya (ICPAK) urged the government and the counties to revise downwards their overall development and recurrent budgets for the remaining three months (April-June) of the 2019/20 financial year, to free up any unspent budgeted amounts to combat Covid-19.
ICPAK chairperson Rose Mwaura also advised the National Treasury to defer payment of Sh18.34 billion in pending bills due by the counties and Sh370 million owed by government ministries, departments and agencies for mid-March for a period of three months.
“The institute acknowledges that the cost of the proposed Covid-19 stimulus and incentive package will be steep. However, the cost of inaction might be more severe,” said Ms Mwaura.
The country recorded 22 new Covid-19 cases, the largest number announced since the first case on March 13.
With no indication of a reduction in the number of Covid-19 cases recorded per day, the surging numbers put the government in a difficult spot over how it will raise money.
The pandemic has hit hard the global economy with all the world countries announcing travel restrictions that have seen major airlines grounded.
Dr Nyakango’s move will hit hard various entities that were waiting to be paid to cushion themselves from the vagaries of the disease, including the county governments that are expected to ramp up their preparedness against the pandemic.
Contractors and suppliers will have to wait longer to get paid.
Article 228 (4) of the constitution gives the Controller of Budget the powers to oversee the implementation of the budgets of the national and county governments.
This includes authorising withdrawals from public funds: the Equalisation Fund, Consolidated Fund and the Revenue Fund.
The Constitution provides that money shall not be withdrawn from the Equalisation Fund, Consolidated Fund and the Revenue Fund without the approval of the Controller of Budget.
The Consolidated Fund contains money raised or received by or on behalf of the national government.
The government can only withdraw from this fund to finance its operations as provided for in the budget through the Appropriation Act.
A day before Dr Nyakango’s announcement, President Uhuru Kenyatta had directed the National Treasury to set up an emergency response fund to augment the country’s preparedness against the global pandemic.
The Treasury has consequently published regulations to help the management of the fund. The regulations will be tabled in the National Assembly when it holds a special sitting on April 8.
The emergency fund shall be overseen by a 10-member board committee chaired by Kenya Breweries managing director Jane Karuku.
The members include former Safaricom CEO Michael Joseph, Equity Group CEO James Mwangi, Kenya Association of Manufacturers CEO Phyllis Wakiaga.
According to the president, the initial allocation to the fund will be sourced from the proceeds of government officials who are expected to commit to voluntary pay cuts.
He announced his 80 per cent voluntary pay cut including his deputy William Ruto.