Nairobi Financial Health Check: Key Risks Triggering Low Fiscal Rating
Nairobi City County has been ranked the country’s worst-performing county in managing pending bills, with the Parliamentary Budget Office (PBO) warning that its growing debt burden reflects deep weaknesses in budget execution and financial management.
The findings are contained in the County Fiscal Performance Measurement Index (CFPMI), which assessed all 47 counties using seven indicators, including budget implementation, development expenditure, own-source revenue, wage expenditure, pending obligations, county assembly expenditure ceilings and audit outcomes.
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The report shows that Nairobi remained the poorest-performing county in managing pending obligations in both the 2023/24 and 2024/25 financial years, receiving an “E” grade after recording a CFPMI score of virtually zero.
“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 Parliamentary Budget Office said the county’s mounting unpaid bills pose a serious risk to service delivery, supplier confidence and public trust in governance.
It noted that the accumulation of arrears has left Nairobi in a precarious financial position, making it increasingly difficult to meet obligations to contractors, suppliers and other service providers.
Debt Burden Raises Alarm
“This implies a backlog of unpaid bills that could paralyze service delivery, discourage suppliers from future contracts, and undermine public trust in governance,” the report says.
According to the report, Nairobi accounts for more than 40 percent of all pending bills owed by county governments. The PBO linked the massive debt burden to persistent weaknesses in budget execution, expenditure controls and debt management.
The report further found that Nairobi showed no improvement in the 2024/25 financial year, retaining a CFPMI score of 0.000 and remaining in the lowest performance category with an “E” grade.
The findings come against the backdrop of growing concern over the increasing cost of pending bills across county governments, despite efforts to strengthen public financial management.
According to the Controller of Budget’s Annual County Governments Budget Implementation Review Report for the 2024/25 financial year, total county pending bills fell slightly to Sh176.8 billion, down from Sh182.46 billion recorded in the previous financial year.
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However, Nairobi remained by far the biggest contributor, with pending bills amounting to Sh86.77 billion, representing nearly half of all outstanding county arrears nationwide. Most of the unpaid obligations are owed to suppliers, contractors and other service providers.
Counties Still Struggle With Arrears
Beyond Nairobi, the Parliamentary Budget Office found that counties across the country continue to struggle with clearing pending obligations despite improvements in other aspects of fiscal management.
The report shows that the national average score for managing pending bills remained at approximately 0.34 during the 2024/25 financial year, highlighting widespread weaknesses in handling unpaid obligations.
According to the assessment, 97.8 percent of counties fell within the lower performance grades, underscoring the scale of the challenge facing devolved governments.
The PBO attributed the poor performance to weak expenditure controls, inadequate cash-flow management and slow clearance of accumulated arrears.
It called on county governments to strengthen commitment controls, improve verification of pending bills and prioritise payment of outstanding obligations to prevent the continued build-up of debt.
The report argues that addressing pending bills will be critical in restoring supplier confidence, improving service delivery and strengthening public confidence in county governments’ financial management.
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If left unresolved, the PBO warns, the growing stock of unpaid bills could continue to strain county finances and undermine the effective delivery of public services across the country.
