Nairobi’s Sh86.8billion debt crisis exposes county’s fiscal management failures
The county not only carries the largest stock of pending bills but also recorded no improvement in its CFPMI performance between the two financial years.
Nairobi City County is emerging as the biggest casualty of Kenya’s worsening county debt crisis, with a Parliamentary Budget Office (PBO) assessment revealing that the capital has accumulated pending bills worth Sh86.77 billion—more than 40 per cent of all arrears owed by county governments.
The scale of the liabilities has pushed Nairobi to the bottom of the County Fiscal Performance Measurement Index (CFPMI), with the county receiving the lowest possible grade for managing pending obligations in both the 2023/24 and 2024/25 financial years.
The PBO report paints a picture of a county struggling to contain its financial commitments, raising questions about how budgets are executed, contracts are managed and payments prioritised in Kenya’s capital.
Nairobi recorded a CFPMI score of virtually zero and retained an “E” grade in 2024/25, despite the county’s central role in the national economy and its comparatively large revenue base.
“Nairobi City County having pending bills far exceeding three times its total annual revenue, it represents the most extreme case of fiscal insolvency among all counties,” the PBO said.
The assessment suggests that the problem goes beyond the accumulation of unpaid invoices, with the arrears threatening to disrupt the county’s ability to deliver services and meet obligations to suppliers, contractors and other service providers.
The PBO warned that the backlog could “paralyze service delivery, discourage suppliers from future contracts, and undermine public trust in governance.”
Sh86.77billion backlog
Nairobi’s position is particularly striking against the broader county debt picture.
According to the Controller of Budget’s Annual County Governments Budget Implementation Review Report for 2024/25, total pending bills across the 47 counties declined from Sh182.46 billion in 2023/24 to Sh176.8 billion by the end of the financial year.
But Nairobi alone accounted for Sh86.77 billion of the outstanding amount, meaning its arrears represented nearly half of the entire county pending-bills burden.
The PBO linked the high level of arrears to weaknesses in budget execution and debt management.
The findings raise questions over whether the county has been entering into financial commitments without adequate assurance that funds will be available when invoices fall due.
The problem also places contractors and suppliers in a vulnerable position, particularly small businesses that depend on government payments to maintain cash flow, pay employees and service loans.
Counties struggle with arrears
Nairobi’s performance is part of a wider challenge confronting county governments.
The PBO found that counties continued to struggle with pending obligations despite improvements in some areas of public financial management.
The average score for managing pending bills stood at approximately 0.34 in 2024/25, while 97.8 per cent of counties fell within the lower performance grades.
The finding suggests that Nairobi’s crisis is an extreme manifestation of a problem affecting much of devolved government.
The PBO attributed the weak performance to shortcomings in expenditure control, cash-flow management and the clearance of accumulated arrears.
It called for stronger commitment controls, proper verification of pending bills and prioritisation of payments.
Such measures would help prevent counties from accumulating new obligations before clearing existing liabilities.
The county not only carries the largest stock of pending bills but also recorded no improvement in its CFPMI performance between the two financial years.
With a score of 0.000 and an “E” grade in 2024/25, the PBO assessment suggests that the capital has yet to reverse the financial management practices that have allowed unpaid obligations to reach unsustainable levels.
