State's debt to suppliers hits crippling Sh525b despite promises

National Treasury CS John Mbadi addresses the media on the e-GP system rollout, at the Treasury Building in Nairobi, on August 28, 2025. [Boniface Okendo, Standard] The national government's debt to suppliers surged 39 per cent in the past year to a record Sh524.84 billion, piling pressure on small businesses. The development also contradicts the Kenya Kwanza administration's pledge to settle arrears that are stifling economic growth. The ballooning pending bills, detailed in a new report by the Office of the Controller of Budget, highlight a critical failure in public financial management under President William Ruto's administration, analysts said. The arrears jumped from Sh378.09 billion a year earlier, with infrastructure and agriculture ministries among the biggest offenders on the list of shame. Experts said the implications of the pending bills crisis are severe, crippling cash flow for a vast network of contractors and suppliers, forcing layoffs and business closures, and eroding the private sector's trust in the government. This, they said, directly undermines the administration's core "Bottom-Up" economic agenda and threatens to stifle the very small and medium enterprises (SMEs) it promised to empower. "I delivered my work on time. They didn't pay. Now the bank is auctioning my machinery this week, and I've had to let all my eight employees go," said the owner of a Nairobi-based construction firm, who sought anonymity to speak freely. Controller of Budget Margaret Nyakang'o is blunt in her assessment, directly linking the State's failure to pay its bills to widespread business distress. "The accumulation of pending bills limits cash flows and affects the operations of business activities, especially small and medium enterprises," Nyakang'o states in the report. "This forces such businesses to either scale back operations, lay off workers, or even shut down operations." The report identifies the main culprits. The State Department for Roads leads with a staggering Sh103.69 billion in unpaid bills. The National Treasury, which has been spearheading the effort to clear the bills, itself owes Sh71.34 billion, while the State Department for Housing and Urban Development has pending bills amounting to Sh76.11 billion. "It also leads to high government costs of doing business due to the accumulation of interest charges and penalties on unpaid invoices, and it erodes trust between the government and the private sector," Nyakang'o says in the report. The findings present a stark contrast to the government's public commitments to contractors and suppliers. Treasury Cabinet Secretary John Mbadi has previously described the clearance of pending bills as a "priority" that will inject missing liquidity into the economy. Treasury did not immediately respond to requests for comment on the record surge in pending bills. The situation is exacerbated by flawed budgetary practices. For instance, Nyakang'o's report points to a recurring issue where the government makes spending cuts during supplementary budget reviews against items where money has already been spent, instantly creating new debt. Analysts say the standoff over unpaid bills, a perennial issue that has plagued multiple administrations, has now become a defining test for President Ruto, who won the 2022 election on a platform of revitalising the economy from the "bottom up." "With businesses shutting down and trust evaporating, the gap between promise and delivery has never been wider or more expensive," said the Nairobi-based contractor who is owed millions of shillings by a State department.

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