State entities are facing a cash-flow crisis, resulting in the non-remittance of Sh72.96 billion in pension and PAYE deductions. As of last month, unremitted pension dues amounted to Sh47.6 billion, while PAYE deductions totaled Sh25.3 billion.
The financial struggles of these entities stem from mounting losses, mismanagement, and reduced financial support from the government. Overall, the entities have accumulated Sh220.81 billion in unpaid obligations, including PAYE, pension, NHIF and NSSF contributions, Sacco deductions, staff loan deductions, and consumables.
The PBO report highlights the liquidity challenges and poor corporate governance within these entities, citing weak or non-existent oversight between their boards and the parent ministries or National Treasury. Arrears for consumables and general supplies reached Sh30.4 billion, followed by Sacco deductions (Sh2.68 billion), staff loan deductions (Sh2.47 billion), and NSSF and NHIF contributions (Sh407.36 million).
The unremitted dues have increased by 17% since June 2022, indicating a combination of principal amounts and penalties. PAYE arrears have risen by Sh5 billion, while pension arrears have increased by Sh800 million.
To address this issue, the government has been providing bailouts to these entities. However, spiraling debt obligations, increased funding needs for development projects, and pressure from international financiers have forced the Treasury to reduce these bailouts.
The PBO recommends that the government allocate Sh150 billion annually for the next five years to assist these entities and require them to reserve 20% of their budgets for debt repayment. The report does not disclose the names of the entities with the highest share of arrears.