Suppliers struggle as government debt soars to Sh706 billion
Among the worst-hit state departments is the National Youth Service under the State Department of Public Service, which owes Sh14.27 billion.
Traders and contractors who do business with the government are struggling to stay afloat due to mounting unpaid bills. Both national and county governments have delayed payments for goods and services, pushing many suppliers into financial distress.
A new report shows that pending bills across the two levels of government had reached Sh706.20 billion by December 31, 2024.
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The national government owes Sh524.04 billion, while counties have accumulated Sh182.13 billion in unpaid dues.
This financial burden has had severe consequences on businesses. Some suppliers who relied on bank loans to fulfil government contracts have defaulted, leading to auctions of their assets.
“Defaults are high because LSO should be a respected document. A lot of businesses rely on loans, so once we are unable to pay on time because our LSOs have not been respected, defaults rise,” said Simon Gichuki, secretary general of the Association of Public Sector Suppliers.
Controller of Budget Margaret Nyakang’o, in her expenditure report covering the first half of the fiscal year, detailed the growing crisis.
She warned that the failure to settle pending bills has led to financial distress, business closures, and slowed economic activity.
“County governments should strive to avoid accumulating pending bills, regardless of their challenges. They can achieve this by entering into agreements or contracts based on their cash flow availability and budget allocations,” the report states.
Despite directives from the presidency and budget oversight bodies urging agencies to clear outstanding bills, the debt continues to rise.
Among the worst-hit state departments is the National Youth Service under the State Department of Public Service, which owes Sh14.27 billion.
The defunct Nairobi Metropolitan Services under the President’s Executive Office has an outstanding debt of Sh13.57 billion.
Other agencies with huge pending bills include the Ministry of Defense (Sh10.27 billion), State Department of Agriculture (Sh7.90 billion), State Department of Transport (Sh6.12 billion), State Department of Medical Services (Sh5.56 billion), and Department of Correctional Services (Sh5.06 billion).
The continued delay in settling these debts has left many businesses in limbo, with some facing collapse.
Suppliers are calling on the government to honour its obligations to prevent further financial hardship in the private sector.
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