The national government has managed to reduce its backlog of unpaid bills by almost Sh57 billion in the three months ending December 2025, marking a major step in addressing long-standing arrears that had delayed projects across the country.
The reduction follows an intensified effort by the Treasury to settle debts, particularly in the road sector, which had seen key works stall due to delayed payments.
According to the latest data from the Treasury, the stock of pending bills dropped from Sh525.4 billion in September 2025 to Sh468.5 billion by the end of December. While this decline provides some relief, the remaining arrears are still considerable, accounting for 2.88 percent of the country’s gross domestic product.
“The total outstanding national government pending bills as of 31 December 2025 amounted to Sh468.5 billion,” the Treasury said in a statement. “These comprise of Sh368.9 billion for the State corporations and Sh99.6 billion for ministries, State departments and other government entities respectively.”
The bulk of these debts relate to State corporations and cover payments to contractors, suppliers, pension obligations, and unremitted statutory deductions for local authorities’ pension schemes.
Persistent delays have continued despite government directives requiring ministries and departments to prioritize clearing pending bills as a first charge during the 2025/26 financial year.
Efforts in the past quarter concentrated on the road sector, where clearing arrears allowed contractors to resume work on stalled projects, providing a boost to construction activity.
To fund the repayments, the government borrowed from commercial banks, including Trade and Development Bank, KCB Bank Kenya, Absa Bank Kenya and UBA Kenya Bank. These loans acted as short-term financing ahead of the planned issuance of the roads bond programme.
Deputy President Kithure Kindiki confirmed that Sh177 billion in road arrears dating back to 2020 had been cleared using these commercial bank loans, unblocking nearly 6,000 kilometres of delayed road works.
The Kenya Roads Board (KRB), responsible for overseeing the bond programme, said the Sh175 billion notes will be issued in stages to investment groups rather than through open markets.
The proceeds will repay the loans used to settle the pending bills, with funds partially drawn from the Road Maintenance Levy Fund, including Sh7 from every Sh25 collected per litre of petrol or diesel sold.
"We are going to the markets next month (February) and this bond will be issued in tranches with a preference to investment clubs. The proceeds will be fully used to pay the loans that we have taken to settle the pending bills,” said KRB acting Director-General Martin Agumbi in a prior interview.
The clearance of arrears has already delivered a positive impact on the construction sector. Data from the Kenya National Bureau of Statistics shows that the sector grew by 5.7 percent in the quarter ending June 2025, reversing a contraction of 3.7 percent in the same period in 2024.
Cement use rose 23.9 percent to 2.4 million tonnes, while imports of essential construction materials such as bitumen, iron, and steel also increased.
Although the Treasury has made notable progress in reducing pending bills, the remaining Sh468.5 billion highlights the ongoing challenges of managing arrears across ministries, State departments, and corporations.
