Kenya's Pending Bills Stay High as Budget Deficit Narrows

The national and county governments left a combined KSh 622.7 billion in unpaid bills during the last fiscal year, even as the National Treasury reported a narrowing budget deficit that officials have cast as evidence of fiscal discipline.

• The draft 2026 Budget Review and Outlook Paper, which still requires Cabinet approval, shows total revenue for the year ended June 2026 fell KSh 60.2 billion short of target, reaching KSh 3.20 trillion against a goal of KSh 3.26 trillion. 
• However, total expenditure missed its target by nearly three times as much, falling short by KSh 172.4 billion to reach KSh 4.48 trillion.
• That gap between the two shortfalls is why the fiscal deficit came in at 6.8% of GDP, below the 7.3% target the Treasury had set, even though revenue collection itself did not improve.

The Treasury reports that investment revenue collection fell KSh 65.4 billion, which it attributed to reduced dividend income following the government's partial divestiture of its stake in Safaricom to Vodacom. Ordinary tax revenue still grew 7% from the prior year, while non-tax revenues collected directly by government ministries, departments, and agencies (MDAs) through user fees, service charges, fines, levies, or specific donor funds rose 21.3%. 

Recurrent expenditure fell KSh 115.4 billion short of target, driven by below-target spending on operations and maintenance, domestic and foreign interest payments, and pensions. Development expenditure missed its target by KSh 39.5 billion, with development projects underperforming by KSh 41.5 billion and transfers to counties falling short by KSh 17.5 billion. Ministries and agencies absorbed just 87% of their combined budget allocations for the year.

Pending Bills

However, that underspending resurfaced elsewhere as unpaid obligations. National government pending bills stood at KSh 465.9 billion at the end of June this year, split between KSh 271.2 billion in recurrent bills and KSh 194.7 billion in development bills. County governments carried a further KSh 156.84 billion in pending bills as of March. 

Nairobi County’s pending bills totaled KSh 81.79 billion, equivalent to 183% of its entire KSh 44.62 billion budget for the year, driven largely by KSh 74.5 billion in unpaid recurrent obligations at the county executive level. Other counties carried smaller but still significant burdens relative to their budgets including Machakos at 36%, Kilifi at 32%, and Narok and Turkana each around a quarter of their annual budgets.

Meanwhile, counties collected just 53.8% of their own-source revenue target for the first nine months of the year, an improvement from the prior year but still leaving more than KSh 46 billion uncollected against the target. Overall budget absorption across counties reached only 52%, with recurrent spending absorbed at 65% against development spending at just 31%, mirroring the national government's own imbalance between day-to-day and capital spending.