Kenya, Counties Struggle With KSh622.7 Billion in Unpaid Bills Despite Lower Budget Deficit

Kenya’s national and county governments ended the last financial year with KSh622.7 billion in unpaid bills. The liabilities persisted despite lower spending helping reduce the fiscal deficit to 6.8 percent of GDP. New budget data also shows counties struggled with revenue collection and development spending.

The latest draft Budget Review and Outlook Paper shows the national government accounted for the largest share of pending bills. By the end of June, unpaid obligations stood at KSh465.9 billion. This included KSh271.2 billion in recurrent bills and KSh194.7 billion in development-related commitments.

County governments also carried significant pending bills. Outstanding county obligations stood at KSh156.84 billion as of March.

The report indicates that government spending came in below budget during the financial year. Revenue collected by June reached KSh3.20 trillion. This was KSh60.2 billion below the target. Expenditure was also lower than planned, falling short by KSh172.4 billion against a KSh4.48 trillion budget.

The lower spending helped narrow the fiscal deficit. The deficit closed at 6.8 percent of GDP, compared to the 7.3 percent target.
Government investment income declined by KSh65.4 billion during the period. The drop was mainly linked to lower dividend earnings following the sale of part of the government’s Safaricom stake to Vodacom.

However, ordinary tax revenue grew by 7 percent. Non-tax revenue collected by ministries, departments and agencies also increased by 21.3 percent.

The report further shows recurrent expenditure was KSh115.4 billion below target. Development spending missed its target by KSh39.5 billion. Ministries and agencies utilized 87 percent of their combined allocations.

Counties also faced challenges in managing finances and raising local revenue. County governments collected only 53.8 percent of their own-source revenue target during the first nine months of the financial year. This left about KSh46 billion uncollected.

Budget absorption at the county level remained low. Overall absorption stood at 52 percent. Recurrent expenditure absorption reached 65 percent, while development expenditure stood at only 31 percent.

County debt levels also remained a concern. Counties accumulated pending debts amounting to KSh81.79 billion. This represented 183 percent of their annual budget allocation of KSh44.62 billion. Of that amount, KSh74.5 billion consisted of unpaid recurrent commitments at the county executive level

The report also highlights growing pressure from county wage bills. Only four of the 47 counties complied with the statutory limit requiring compensation costs to remain below 35 percent of total revenue.

The aggregate county wage bill stood at 44.2 percent of total income. Homa Bay, Machakos and Baringo each recorded wage bills above 55 percent. Three counties spent more than 80 percent of their total revenue on recurrent expenditure.

The findings point to persistent fiscal management challenges at both national and county levels. They also underscore the need for stronger revenue collection, spending efficiency and settlement of pending bills.