The government settled Sh118.3 billion in pending bills during the first quarter of 2025, signaling a renewed commitment to reduce long-standing arrears across key ministries and state departments.
Data from the National Treasury reveals that outstanding government debt dropped from Sh539.9 billion at the end of 2024 to Sh421.6 billion by the end of March 2025.
The sharp decline follows the Exchequer’s approval for ministries and departments to begin clearing verified arrears, with a significant portion of the payments directed toward the infrastructure sector.
According to Treasury Cabinet Secretary John Mbadi, the government has already begun paying Sh80 billion in approved road-related bills using funds from the Road Maintenance Levy.
“About Sh80 billion of the approved bills relate to the road sector, and we have started settling those bills using the securitisation of the Sh7 per litre road maintenance levy,” Mbadi said.
“Pending bills are coming down partly because of the road sector settlements. For the balance of Sh148 billion, we are working to make a proposal to the Cabinet to settle the bills. By the time we get the approval, the committee will be done with the verification, and we can add approved pending bills to the balance to be settled,” he added.
Sensitive ministries such as Defence have already been cleared to commence payments, with other departments also receiving the green light.
A report from the Pending Bills Verification Committee shows that of the Sh663 billion in bills submitted by various agencies, Sh578 billion had been verified as of March. However, only Sh229 billion was certified for payment—this includes the Sh80 billion allocated to the road sector.
At its peak in September 2023, the national government’s pending bills stood at Sh630.6 billion. As of March 2025, the Sh421.6 billion pending amount includes Sh162 billion in recurrent expenditure and Sh259.7 billion in development obligations. These cover unpaid dues to contractors and suppliers, unremitted statutory deductions, and pension arrears owed to the Local Authorities Pension Trust.
While state corporations largely owe contractors and suppliers, ministries, departments, and agencies (MDAs) are grappling with historical arrears, the Treasury noted.
To further ease the burden in the roads sector, the Kenya Roads Board (KRB) has been cleared to issue a Sh135 billion infrastructure bond. Proceeds from the bond, arranged by the Trade and Development Bank, will go directly toward settling road-related arrears.
Investors will be compensated through the Roads Maintenance Levy Fund, which was increased in July 2024 from Sh18 to Sh25 per litre. Treasury officials noted that the bond’s pricing could be about 1.5 percentage points above the 91-day Treasury bill rate.
The proposed bond forms part of a broader strategy by the Kenya Kwanza administration to address the mounting pending bills through off-budget settlements.
As part of this strategy, the government also plans to hire a transaction advisor to guide the securitisation of verified arrears, as outlined in its development manifesto.
