Penalties and interests of delayed payments by State agencies jumped by Sh3.7billion in the financial year ended June 30, 2025, adding to their woes amid struggles to pay contractors.
Disclosures by the Controller of Budget (CoB) show that the total penalties and interest charges on pending bills rose to Sh25.28 billion, up from Sh21.58billion mainly driven by dues by the Kenya Rural Roads Authority (Kurra) and the Kenya National Highways Authority (KeNHA).
The rise piles more pressure on the corporations, State-owned enterprises, and Semi-Autonomous Government Agencies (SAGAs) that continue to struggle in paying contractors for goods and services delivered.
Contractors have endured years of waiting to get paid after supplying goods and services to the State, as CoB warns of unpaid bills as one of the biggest hurdles in the implementation of the budget.
Controller of Budget Margaret Nyakang'o.
Photo credit: Jared Nyataya | Nation Media Group
“To address the challenges, the Controller of Budget recommends that the National Treasury fast-tracks the settlement of verified pending bills,” the CoB, Margaret Nyakang’o, notes in the latest budget review.
An analysis of the official data shows that the penalties and interest on Kurra jumped to Sh12.34 billion in the review period from Sh9.72 billion the previous financial year, while that of Kenha rose by Sh2.3 billion to Sh7.81 billion.
Kurra and KeNHA were expected to significantly lower their bills, given the Sh73 billion loan that the State secured early this year to pay off contractors. The loan will be repaid via a Sh175 billion bond that will be floated before the end of this year.
Others, like the National Oil Corporation of Kenya, paid Sh2.58 billion, cutting its penalties and interest bill to Sh1 billion in the period.
Firms that did business with the government have been forced to halt expansion plans, reduce their operations, or increasingly rely on bank loans to fund operations amid the delays in getting their dues from the State.
“Accumulation of pending bills restrains cash flows to businesses, resulting in liquidity constraints, especially for Small and Medium-sized Enterprises, as they have to endure the long wait for settlement of overdue payments. This forces such businesses to either scale back operations, lay off workers, or even shut down operations,” Dr Nyakango added.
Pending bills continue to rise as the government entities disregard directives from the National Treasury to clear the dues and ease cash-flow hitches in the private sector.
The CoB data shows that the principal amounts that the public entities owe contractors rose to Sh379.04 billion in the year ended June, from Sh358.3 billion a year ago.
Treasury has, in recent times, reduced budgetary allocations to the corporations, State-owned enterprises, and SAGAs, further hurting their efforts to clear the arrears.
Pending bills by the national government shot up by Sh104 billion in three months to June 2025, bucking a trend of reduced dues witnessed since the start of the pay down of verified arrears.
Fresh data from the National Treasury shows that outstanding pending bills by the national government rose to Sh526 billion between April and June 2025 from Sh421.6 billion in March.
Previously, the arrears mostly owed to suppliers and contractors had fallen by Sh118 billion from Sh539.9 billion in December 2024 as the government began clearing arrears, starting with road sector pending bills.
Accumulation of the pending bills has significantly hit the trust that the private sector held in doing business with the government. The pending bills menace has further been exacerbated by concerns of fake claims lodged in collusion between rogue contractors and officials working in different State entities.
Treasury formed a committee to scrutinise all pending bills from 2022 as the State races to clear the arrears. The team was formed in September 2022 and was expected to close the process in June this year.
The committee had, by March this year, cleared Sh206 billion for payment out of a total of Sh664 billion worth of claims that contractors lodged.
