Unpaid govt bills rise to Sh465.87bn amid mounting debt ressures

Kenya's government agencies have accumulated a staggering Sh465.87 billion in unpaid bills by March 2026, a persistent fiscal challenge that significantly constrains service delivery and exposes the government to increased litigation and costs. This article examines the legal and constitutional framework governing public finance management in Kenya, including the Public Finance Management Act, 2012, and the Public Procurement and Asset Disposal Act, 2015. It delves into the implications of these pending bills for suppliers and contractors, outlining available legal remedies such as breach of contract claims and mandamus orders, while also highlighting the inherent difficulties in enforcing judgments against government entities. The analysis further considers the role of the Controller of Budget and recent legislative proposals aimed at fostering prompt payment and accountability.

The issue of mounting pending bills owed by government entities in Kenya has reached critical levels, posing a significant threat to the country's economic stability and the efficient delivery of public services. By March 2026, the total outstanding obligations had surged to an alarming Sh465.87 billion, comprising both recurrent and development expenditure. This substantial debt burden not only stifles the liquidity of businesses, particularly small and medium-sized enterprises (SMEs), but also undermines investor confidence and the overall health of the economy. The Controller of Budget has repeatedly warned that these unpaid obligations are severely constraining service delivery and project implementation, while simultaneously exposing the government to increased litigation and additional costs.

This article aims to provide legal practitioners with a comprehensive overview of the legal landscape surrounding government pending bills in Kenya. It will explore the constitutional and statutory provisions that govern public finance and procurement, analyze the legal avenues available to aggrieved suppliers and contractors, and discuss the practical challenges associated with enforcing claims against the government. Furthermore, the article will touch upon ongoing efforts and proposed legislative reforms designed to address this entrenched problem, offering insights into the evolving regulatory environment and its implications for legal strategy.

Public finance in Kenya is primarily governed by Chapter Twelve of the Constitution of Kenya, 2010, which lays down fundamental principles such as openness, accountability, public participation, prudence, and responsible financial management. These principles are operationalized through key legislative instruments, most notably the Public Finance Management Act, 2012 (PFMA), and the Public Procurement and Asset Disposal Act, 2015 (PPADA). The PFMA establishes the framework for managing public finances at both national and county government levels, stipulating how public funds are raised, allocated, spent, and accounted for.

The Office of the Controller of Budget (CoB), established under Article 228 of the Constitution, plays a crucial oversight role by authorizing withdrawals from public funds and monitoring budget implementation at both national and county levels. The CoB is mandated to ensure that any withdrawal from public funds is authorized by law. The PPADA, on the other hand, governs the procurement of goods, works, and services by public entities, emphasizing principles of fairness, transparency, and timely settlement of obligations under Section 96. Despite this robust legal framework, the accumulation of pending bills has become a structural feature of Kenya's fiscal system, encompassing supplier invoices, statutory deductions, pension arrears, and court awards. The National Treasury has, through various circulars, consistently directed government entities to prioritize the payment of pending bills, yet compliance remains a significant challenge.

The persistent accumulation of pending bills by government entities constitutes a material breach of contractual obligations and a violation of the principles of public finance enshrined in the Constitution and statutory law. For suppliers and contractors, this non-payment can lead to severe liquidity crises, business collapse, and a general erosion of trust in government contracts. Legally, such unpaid obligations are considered public debt under Articles 212-214 and 260 of the Constitution.

Aggrieved parties have several legal avenues for recourse. A primary remedy is to institute civil suits for breach of contract, seeking compensatory damages, specific performance, or other appropriate relief under the Law of Contract Act (Cap 23). However, enforcing judgments against government entities in Kenya presents unique challenges. Historically, the Government Proceedings Act (Cap 40) provided certain protections to the government, including a requirement for a 30-day notice before filing suit and restrictions on execution against government property. While the High Court, in *Absa Bank Kenya PLC Versus Kenya Deposit Insurance Corporation (Milimani Commercial Case No. E411 of 2023)*, declared sections 13A and 21 of the Government Proceedings Act unconstitutional for conferring preferential treatment to the government, Order 29 Rule 2 of the Civil Procedure Rules, 2010, still limits certain enforcement methods against the government, such as attachment of property. In cases where an accounting officer fails to pay a decretal sum, a judgment holder may apply for an order of mandamus in the High Court to compel the public officer to effect payment.

The Public Finance Management Act, 2012, explicitly prohibits commitments without budgetary provision (Sections 15, 44) and introduces personal liability for public officials who authorize irregular expenditures under Article 226(5) of the Constitution. Treasury Circular No. 10/2020 further warned accounting officers of their obligations and potential punitive actions for accumulating liabilities not sanctioned by law. The proposed Prompt Payment Bill, 2020, seeks to introduce interest penalties for late payments by procuring entities and impose fines or imprisonment on accounting officers who negligently fail to pay amounts due. These provisions underscore a legislative intent to enhance accountability, though their effective enforcement remains a critical hurdle. The Controller of Budget's reports consistently highlight the problem, with the latest indicating Sh465.87 billion in pending bills by March 2026, attributing some delays to operational challenges with the Electronic Government Procurement (e-GP) system.

Efforts to address the issue include the establishment of verification committees to ascertain the authenticity of pending bills. For instance, out of Sh637 billion in claims submitted, a committee recommended Sh235.6 billion for settlement, with Sh68 billion allocated in the 2026/27 budget to clear verified claims, prioritizing those below Sh100 million to support SMEs. This indicates a recognition of the problem and a structured approach to resolution, albeit one that will take time to fully implement. The transition from cash to accrual accounting, as outlined in Treasury Circular No. 3/2025, is also a significant reform aimed at providing a more accurate picture of government liabilities and preventing the accumulation of hidden arrears.

The persistent rise in unpaid government bills in Kenya presents a complex legal and economic challenge, demanding a multi-faceted approach from legal practitioners. For attorneys representing suppliers and contractors, a thorough understanding of the Public Finance Management Act, 2012, the Public Procurement and Asset Disposal Act, 2015, and the nuances of enforcing judgments against government entities is paramount. While the *Absa Bank* decision has eased some procedural hurdles, the practicalities of execution against the government remain intricate, often necessitating strategic use of remedies like mandamus orders.

Practitioners should advise clients on robust contractual clauses, diligent record-keeping, and proactive engagement with government entities to verify bill eligibility. Monitoring the implementation of the Prompt Payment Bill, 2020, and the effectiveness of verification committees and new budget allocations will be crucial. The ongoing shift to accrual accounting and the emphasis on personal liability for accounting officers signal a potential for greater accountability. However, the sheer scale of the pending bills suggests that this issue will continue to be a significant area of legal practice and public discourse in Kenya for the foreseeable future, requiring vigilance and adaptive legal strategies from all stakeholders.