Counties to Prioritize Pending Bills and Contain Wage Pressures

As county governments finalize and present their budgets to County Assemblies for approval, Kenya enters a pivotal phase in the Public Finance Management (PFM) calendar. This window—April to June—is not only crucial for aligning county priorities with development goals but also offers a rare opportunity to address two growing fiscal threats: accumulating pending bills and rising staff emoluments.

The county budget process is a structured, year-long cycle that begins in August with the issuance of the County Budget Circular, which sets out the timelines, policy priorities, and guidelines for budget preparation.

By September, counties prepare the Annual Development Plan (ADP), followed by the County Budget Review and Outlook Paper (CBROP) in October, which reviews previous budget performance and sets the macro-fiscal outlook. Between November and January, departments develop sector ceilings and draft their budget proposals, leading to the preparation of the County Fiscal Strategy Paper (CFSP) by February 28th, outlining final ceilings and priorities.

Alongside the CFSP, counties are required to prepare the County Debt Management Strategy that spells-out the county debt obligation and the strategy the county has set to honour the obligation. This debt management strategy paper is actually the legal paper that pending bills are supposed to be documented and strategies put in place of honouring the payment.

In April, the County Executive submits the Budget Estimates to the County Assembly, which must be reviewed and approved by June 30th. Public participation, departmental hearings, and oversight engagement occur throughout this cycle, ensuring transparency and accountability in resource allocation.

According to data from the OCOB, pending bills in county governments have risen sharply. In FY 2017/2018, counties had budgeted approximately KES 20.3 billion for pending bills. However, by FY 2024/2025, this budget line has more than doubled to KES 52.2 billion, with actual verified pending bills exceeding KES 160 billion as of March 2025. This indicates that counties are consistently underfunding and deprioritizing the settlement of these obligations.

This deferred expenditure continues to hurt local businesses, particularly small and medium enterprises (SMEs) that rely on county contracts. Delays in payment lead to cash flow problems, loan defaults, job losses, and, in some cases, total business collapse. The ballooning of pending bills is not merely an accounting concern—it represents a real threat to the health of local economies and the credibility of devolved governance.

The Public Finance Management Act, 2012, and subsequent guidelines by the National Treasury and the Office of the Controller of Budget (OCOB), clearly require counties to prioritize payment of pending bills as a first charge on the budget. Furthermore, the Public Procurement and Asset Disposal Regulations emphasize prompt payment for delivered goods and services. Failure to comply not only contravenes the law but also erodes trust in public procurement systems.

Compounding the problem is the escalating cost of staff emoluments. Counties are now spending, on average, over 52% of their total budgets on wages and benefits, far above the 35% ceiling recommended by the PFM (County Governments) Regulations, 2015. This wage pressure has steadily crowded out development funding, leaving fewer resources for infrastructure, social programs, and economic investments.

As County Assemblies review the budgets, and as citizens and oversight agencies engage in the process, this is the time to demand fiscal discipline. Counties must demonstrate commitment to paying verified pending bills and restraining wage growth through rationalized staffing, automation, and better workforce planning.

Unless this moment is seized to course-correct, counties risk continued financial distress, shrinking development impact, and diminishing public trust in devolution.

April 14, 2025

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Murungi Ndai

Mr. Ndai is an experienced public sector economist, experienced in sub-nationals having greatly influenced development of policies relating to revenue mobilization by Counties Governments. He collaborates with the private sector, governments and NGOs to address critical topics, including county growth strategies, borrowing and leasing by counties, MSME support and public finance management. murungindai@gmail.com