County governments failed to use nearly half of the money set aside for development in the 2025-26 financial year, leaving more than Sh107 billion unspent as high wage bills and unpaid debts continued to put pressure on their finances.
Data contained in a report by Controller of Budget Margaret Nyakang’o shows that counties spent Sh126.69 billion from the Sh233.69 billion approved for development, giving an absorption rate of 54.21 per cent.
The amount used for development represented just 25.51 per cent of the total expenditure reported by the counties during the year, pointing to continued difficulties in implementing projects that had received budgetary approval.
A total of 42 counties recorded development budget absorption rates of less than 75 per cent.
Kisumu had the lowest uptake, spending 25.92 per cent of its Sh10.09 billion development allocation. Siaya followed with an absorption rate of 26.53 per cent, while Elgeyo Marakwet and Narok spent 34.17 per cent and 34.42 per cent respectively.
Kisii absorbed 41.01 per cent of its allocation, while Kiambu recorded 43.19 per cent. Laikipia spent 45.49 per cent of its development budget, with Nakuru absorbing 48.97 per cent.
The report shows that only four counties managed to spend more than three-quarters of their development allocations.
Kilifi posted the highest rate at 84.52 per cent, followed by Wajir at 83.03 per cent. Mandera recorded 80 per cent, while Meru spent 79.04 per cent.
Nyakang’o said the low spending on development was slowing down the implementation of projects approved by county governments and called for closer monitoring of budget absorption.
“I have directed that county treasuries should also monitor the monthly absorption of the development budget and take immediate corrective action through lawful supplementary budgets when bottlenecks occur,” she said.
The slow uptake of development funds came at a time when county governments were also spending a large share of their resources on employees.
The counties reported spending Sh235.96 billion on employee compensation, equivalent to 39.54 per cent of their combined revenue of Sh596.78 billion.
This was above the statutory ceiling of 35 per cent, reducing the share of county resources available for development and service delivery.
Homa Bay recorded the highest employee compensation-to-revenue ratio at 56.21 per cent. Nyeri followed at 52.14 per cent, while Taita Taveta stood at 49.23 per cent.
Nyakang’o said counties needed to control their payroll costs and ensure that recruitment was matched with the resources available to them.
“County governments should implement payroll containment measures to reduce the wage bill to within the 35 per cent threshold provided for by Section 107(2) of the PFM Act by June 30, 2028,” she said.
The Controller of Budget recommended payroll audits, stronger recruitment controls, staff rationalisation and enforcement of approved staff establishment limits as measures to address the rising wage bill.
Counties were also dealing with a large stock of unpaid bills, adding to the financial pressure facing the devolved governments.
As of June 30, 2026, counties had reported outstanding trade payables of Sh172.53 billion. The amount excludes Nandi County, which had not submitted its figures.
Recurrent expenditure accounted for Sh126.40 billion of the outstanding obligations, while another Sh46.15 billion was owed in connection with development activities.
The unpaid bills add another financial obligation for counties as they seek to fund current programmes while dealing with commitments carried over from previous periods.