By Benadeta Mwaura - Reporter
Kenya, December 17 2025 - Kenya’s public sector is facing a growing crisis of unpaid obligations, with state corporations failing to pay Sh26.8 billion in salaries and remitting Sh39 billion in health insurance contributions between July and September 2025, according to the latest Controller of Budget (CoB) report.
These unpaid dues, totaling over Sh66 billion, helped push the national government’s total pending bills beyond Sh525 billion, undermining gains from partial clearance efforts and exposing deeper fiscal challenges.
According to the CoB’s budget implementation review, unpaid salaries by state corporations more than tripled from around Sh10.5 billion to Sh37.3 billion during the quarter.
At the same time, contributions owed to the National Hospital Insurance Fund (NHIF), now overseen under the new Social Health Authority (SHA), jumped from a negligible amount to Sh39 billion.
Controller of Budget Dr Margaret Nyakang’o noted that while the government made progress in reducing some categories of arrears, the accumulation of new unpaid bills erased those gains, contributing to rising total pending bills.
She explained that earlier settlements, including pension arrears and contractor payments, were effectively offset by this surge in unremitted statutorily required payments.
Dr Nyakang’o also emphasised that state corporations accounted for a disproportionate share of liabilities, representing about 77 percent of all pending bills reported, with the remainder split between central government ministries, departments, and agencies.
Economic Ripple Effects and Broader Pending Bills
Pending bills, often described by economists as “hidden debt”, have ballooned to levels that threaten macroeconomic stability. Recent analysis shows that total overdue government payments now approach Sh525 billion, nearly matching major budget allocations and crowding out development spending.
Dr Nyakang’o warned that such arrears restrict cash flow across the economy and undermine small and medium-sized enterprises that rely on prompt government payments to operate.
The CoB highlighted that the bulk of unresolved obligations includes commercial contractor payments, statutory remittances such as PAYE tax, SACCO contributions, National Social Security Fund dues, and arrears owed to the NHIF system.
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Government Response and Health Sector Dynamics
The surge in unpaid health insurance contributions comes against the backdrop of a major overhaul of Kenya’s health insurance system.
The government replaced the longstanding NHIF scheme with the new Social Health Authority (SHA) system, intended to streamline universal health coverage and cut fraud.
However, implementation challenges have emerged, including delayed remittances that, according to stakeholders, are contributing to mounting liabilities. Earlier in 2025, President William Ruto directed the settlement of approximately Sh33 billion in legacy NHIF debts owed to hospitals, prioritising facilities owed Sh10 million and below for immediate payment and setting verification processes for larger claims.
Ruto said the accumulated debt from the old NHIF compromised service delivery and needed urgent attention. Health Cabinet Secretary Aden Duale has also led efforts to crack down on fraud and inefficiencies in the health insurance framework, including audits of suspect claims and the establishment of stronger fraud detection systems to protect public funds.
The unpaid salary and statutory remittance backlog is not just a bookkeeping headache, it has real human consequences. Workers across sectors have faced prolonged delays in receiving pay and statutory benefits, prompting industrial unrest. In Eldoret, members of the Communication Workers Union of Kenya (CoWU) downed tools to protest seven months of unpaid salaries and unpaid statutory deductions, demanding government intervention to settle outstanding dues.
CoWU’s Eldoret Branch Chairperson, John Kiplimo, urged the government to expedite payments, noting that arrears owed by institutions such as Posta Kenya and the Independent Electoral and Boundaries Commission (IEBC) could help ease their plight if released promptly.
The Sh66 billion in unpaid salaries and health insurance arrears is a stark reminder of the pressures on Kenya’s public finances. While the government has taken steps to settle legacy health debts and audit fraud in the health system, emerging unremitted liabilities indicate persistent structural challenges.
As the fiscal year progresses, policymakers will be under pressure to prioritise timely payment of statutory obligations, strengthen budgeting and payment systems, and protect service delivery by restoring confidence among workers and suppliers alike.
