State suppliers wait as Nyakang'o warns Sh466bn pending bills hurting economy

A review by Controller of Budget Margaret Nyakang'o shows the stock of unpaid obligations not only remains one of the biggest threats to budget implementation, but is also hurting the economy.

In the review covering the first nine months of the current spending period, Nyakango revealed that the national government's pending bills stood at Sh465.9 billion by the end of March.

The review established that ministries, departments, agencies and semi-autonomous government agencies continue to accumulate unpaid bills even as the government seeks to restore fiscal discipline.

The Controller of Budget warns that the huge pile of arrears is constraining businesses, delaying projects and undermining confidence among firms that supply goods and services to government.

As of March 31, 2026, total national government pending bills stood at Sh465.87 billion, comprising Sh194.71 billion in development-related obligations and Sh271.16 billion in recurrent expenditure arrears owed by ministries, departments, agencies and state agencies.

The latest figures emerge even as the government implements recommendations of the Pending Bills Verification Committee, which scrutinised claims worth hundreds of billions of shillings and validated a portion for settlement.

Treasury Cabinet Secretary John Mbadi recently told Parliament that the committee analysed 91,911 claims valued at Sh637.6 billion and recommended Sh235.6 billion for payment, with Sh80.3 billion already settled through securitisation in the roads sector. The remaining verified balance stands at Sh155.3 billion.

However, Nyakang'o's report suggests the pending bills challenge remains deeply entrenched across government.

Among ministries and agencies, the biggest debtor was the National Youth Service under the State Department for Public Service, which accumulated trade payables of Sh14.27 billion.

It was followed by the former Nairobi Metropolitan Services, now under the Executive Office of the President, with outstanding obligations of Sh13.07 billion.

The NMS liabilities continue to haunt the government years after the agency was wound up, forcing Treasury to allocate additional resources to settle historical claims.

Other major debtors included the State Department for Housing and Urban Development (about Sh11.18 billion), the Ministry of Defence (Sh8.85 billion), the State Department for Roads (Sh6.79 billion), the State Department for Medical Services (about Sh5.8 billion), the State Department for Correctional Services (about Sh5.2 billion) and the State Department for Broadcasting and Telecommunications (about Sh3.5 billion).

The report notes that the largest share of these arrears relates to unpaid contractors, suppliers and development projects.

During the review period, the Controller of Budget approved withdrawals to facilitate partial settlement of verified historical pending bills inherited from the defunct NMS.

The report indicates that although some progress has been made in reducing arrears, the burden remains substantial.

Further analysis shows pending bills under ministries and agencies declined only by Sh33.33 billion during the nine-month period.

These were largely due to payments made and some claims being declared ineligible after verification.

Of this reduction, Sh20.94 billion related to recurrent expenditure payments while Sh9.75 billion was paid under development expenditure.

The bulk of outstanding obligations has been reported in state corporations, SAGAs and state-owned enterprises.

They consist of contractor and project claims amounting to Sh168.83 billion, accounting for 45 per cent of all arrears in that category.

Unpaid consumables and general supplies account for another Sh47.37 billion while employee-related liabilities continue to mount.

Salary arrears stood at Sh40.21 billion, while unpaid obligations linked to the National Hospital Insurance Fund amount to Sh39.64 billion.

The report shows unpaid PAYE deductions have reached Sh26.5 billion, while sacco deductions not remitted stand at Sh9.22 billion.

Nyakang'o says such statutory deductions should never accumulate because they represent mandatory obligations deducted from workers' salaries.

"Accounting officers should ensure the timely payment of statutory deductions, as failure to do so is likely to affect staff welfare and morale," she says.

She notes that settling verified pending bills would inject much-needed liquidity into the economy, strengthen businesses and ultimately boost government revenues.

"Payments for development projects will strengthen businesses' liquidity and increase government tax revenue," Nyakang'o says in the report tabled in Parliament.

The persistence of pending bills is also being linked to delayed completion of government projects.

The Budget Controller cites several projects where funding shortfalls and implementation delays risk generating additional arrears.

In some cases, contractors remain on site despite little or no funding being released, creating conditions for new payment claims to accumulate.

Nyakang'o has recommended that verified pending bills be settled on a first-in, first-out basis and adequately budgeted for in annual and medium-term expenditure plans to prevent the continued build-up of arrears.

The recommendation reflects growing concern that unless government clears what it owes suppliers and contractors, the pending bills burden will continue to choke cash flows in the private sector, slow project implementation and weaken economic activity.