NAIROBI, Kenya – Thousands of businesses supplying goods and services to the government are on the brink of collapse due to mounting unpaid bills, with pending debts surpassing Sh706 billion as of December 31, 2024.
A new report shows that both the national and county governments have defaulted on payments, leaving traders and contractors struggling to stay afloat.
The report reveals that the national government owes Sh524.04 billion, while county governments have accumulated Sh182.13 billion in unpaid dues.
This financial strain has pushed many businesses into distress, particularly those that rely on bank loans to fulfil government contracts. Some have defaulted, resulting in auctions of their assets.
“Defaults are high because an LSO (Local Service Order) should be a respected document. Many businesses depend on loans, and when payments are delayed, 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 financial year, warned that the failure to clear pending bills is crippling businesses, slowing economic activity, and forcing many suppliers to shut down.
She urged county governments to only enter contracts based on available cash flow and budget allocations to prevent further debt accumulation.
Despite repeated directives from the presidency and budget oversight agencies to clear the debts, the backlog continues to grow.
Some of the worst-hit state departments include:
- National Youth Service – Sh14.27 billion
- Nairobi Metropolitan Services (defunct) – Sh13.57 billion
- 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
- Department of Correctional Services – Sh5.06 billion
These agencies’ failure to honour payments has left many suppliers in limbo, struggling to pay employees and service loans.
Traders and contractors are now calling on the government to urgently release funds to clear the pending bills before more businesses collapse.
“We are suffering. Some of us have lost everything because of these unpaid bills. The government must honour its obligations,” lamented a contractor who supplies medical equipment to public hospitals.
With Kenya’s rising debt burden and a struggling economy, the government faces tough choices—whether to prioritise debt repayment or rescue struggling businesses that keep vital services running.
