Government agencies incurred an additional Sh4.1 billion in penalties and interest due to unpaid bills between January and March this year, pushing the total figure to Sh14.72 billion.

This reflects the growing financial pressure caused by delays in settling debts, worsened by budget cuts and strained revenue flows.

According to data from the Controller of Budget, the amount rose from Sh12.07 billion at the end of December last year.

The Kenya Rural Roads Authority recorded the sharpest increase, with penalties and interest jumping by Sh2.6 billion to reach Sh14.72 billion.

The Kenya National Highways Authority followed closely, with an increase of Sh1.09 billion to Sh8.09 billion.

The delayed payments have not only triggered extra charges but also tightened liquidity across the private sector, especially among small and medium-sized businesses. Many firms have been forced to halt expansion, freeze hiring, lay off workers, or take on loans to stay afloat.

“It (high pending bills) 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,” said Controller of Budget Margaret Nyakango.

The Water Resources Authority reported a new penalty of Sh84.68 million in the three months to March.

The National Oil Corporation also faced an additional charge of Sh50.14 million, bringing its total liabilities to Sh1.01 billion. The Kenya Urban Roads Authority recorded a rise of Sh30.13 million, pushing its penalty burden to Sh478.3 million.

Nyakango further warned that the mounting arrears are hurting business operations across the board.

“Accumulation of pending bills restrains cash flows to businesses, resulting in liquidity constraints, especially for small and medium-sized enterprises, as they have to endure the long wait for settlement of overdue payments. This forces such businesses to either scale back operations, lay off workers, or even shut down operations,” she added.

However, the roads sector is expected to reduce its outstanding bills from March onwards following the government’s move to secure a Sh73 billion loan to settle pending payments owed to contractors.

The funds will be repaid through a Sh175 billion bond expected to be issued later this year.

Despite this intervention, government institutions, much like county governments, have a long history of defaulting on payments.

The persistent delays have affected contractors and even lenders, further shaking private sector confidence in the state’s ability to pay for services rendered.