Pending bills surge to Sh525b, crippling businesses and straining SMEs

The amount of money that the national government owes different businesses increased over the financial year to June this year, with companies continuing to bear the burden of pending bills that have seen many of them scale down, while some have shut down.

A new report by the Controller of Budget (COB) shows that pending bills by different Ministries, Departments and Agencies (MDAs) and state corporations increased to Sh524.84 billion in the year to June 2025, up from Sh516.27 billion recorded in June 2024. 

This is despite past assurances by the National Treasury that the government would address the matter decisively, saying mechanisms were in place to prevent state entities from accumulating further pending bills.

According to the report by COB, of the Sh524.8 billion in pending bills, Sh404.33 billion (77 per cent) is owed by state corporations, and Sh120.51 billion (23 per cent) is owed by MDAs. 

“Pending bills for the National Government MDAs amounted to Sh524.84 billion as of 30th June 2025, compared to Sh516.27 billion reported as of 30 June 2024 made up of Sh74.34 billion (52 per cent) for recurrent votes and Sh250.50 billion (48 per cent) for development votes,” said COB in the report on the implementation of the budget for the 2024/25 financial year. 

Other than the Sh524.84 billion owed by the national government entities, the report revealed that county governments owe another Sh172.5 billion as of March this year.

For state corporations, the most increase in pending bills was recorded in the ‘others’ category, which almost doubled from Sh49.5 billion to Sh84.5 billion as at June 2025.

Pending remittances to the Higher Education Loans Board (Helb) increased in the period under review from Sh18.4 million to Sh25 million as remittances to the National Hospital Insurance Fund (NHIF), now known as Social Health Authority (SHA), shot from Sh76.4 million to Sh125.6 million.

At the same time, pending bills owed to the tax man on Pay As You Earn (PAYE) increased from Sh19 billion to Sh23.4 billion, while pension arrears increased by Sh1.7 billion to Sh34.7 billion.

However, pending bills owed to contractors for development projects reduced from Sh235 billion to Sh211 billion.

COB added that the money is owed to different players, including contractors for government projects, suppliers, unremitted statutory and other deductions and pension arrears for the Local Authorities Pension Trust. 

COB, however, noted the impact that the money that remained outstanding has had on contractors and supplies, many of them being forced to scale down their operations or even close shop.

“The accumulation of pending bills restrains business cash flows, resulting in liquidity constraints, especially for Small and Medium-sized Enterprises (SMEs), as they have to endure the long wait to settle overdue payments,” said COB in the report.

“This may force SMEs to either scale back operations, lay off workers, or shut down operations.”

Cash flow restrained

There are also concerns about the impact on the government, which now has to pay penalties for delays in clearing pending bills, while at the same time pushing away genuine private sector firms from doing business with the state.

“It also leads to high government business costs due to accumulation of interest charges and penalties on unpaid invoices, eroding trust between the government and the private sector,” said COB, further recommending that the government should complete verification and payment of pending bills. 

“The National Treasury should fast-track the verification of all pending bills of the National Government and expedite the payment of eligible pending bills.” 

Treasury had, in September 2023, formed the Pending Bills Verification Committee that is chaired by former Auditor General Edward Ou, but the Committee is, however yet to give its recommendations two years later. The committee was to vet pending bills, giving the government a clearer picture of what were legitimate claims as well as recommendations on how to go about clearing the claims. 

It was initially expected to hand over its report by the end of September last year. This, however, did not happen, but the Committee’s term was extended by six months to March 31 this year, but it has yet to hand in the final report to date.

When he delivered this year’s budget speech in Parliament on June 12, Treasury CS John Mbadi said the Committee would hand over the report by June 30, but this has yet to happen, casting doubts on the government's commitment to resolving the matter that dates back to 2005.

He noted that the committee received a total of 65,627 pending bill claims valued at over Sh571.6 billion. As of June, Mbadi had told Parliament, it had analysed 57 per cent of the claims received, valued at Sh522.9 billion. Out of this, a total of Sh229 billion has been recommended for settlement.