Pending Bills Should Be a First Charge in Budgets: A Constitutional and Economic Imperative

Pending bills—unpaid obligations by national and county governments—have been a recurring challenge in Kenya’s public finance management. The failure to prioritize these obligations not only undermines service delivery but also erodes trust in government institutions. According to the Public Finance Management (PFM) Act and the Constitution of Kenya, pending bills should be the first charge when preparing national and county budgets. Here’s why this principle is not just legally mandated but also an economic and ethical necessity.

Legal Obligation Under the Public Finance Management Act and the Constitution

Article 201 of the Constitution of Kenya emphasizes prudent use of public funds, transparency, and accountability. Furthermore, the PFM Act explicitly requires that governments settle pending bills before making new expenditures. This legal framework ensures that commitments made by public institutions are honored, reinforcing fiscal discipline and preventing accumulation of government debt that cripples service delivery.

Counties and national government agencies have frequently flouted this requirement, resulting in a backlog of debts owed to suppliers, contractors, and employees. By not adhering to the first charge principle, government entities violate the law and perpetuate economic distress among businesses that depend on timely payments.

Impact of Pending Bills on Economic Growth and Private Sector Stability

Delays in settling pending bills have far-reaching consequences on the economy, particularly on the private sector. Many small and medium-sized enterprises (SMEs), which form the backbone of Kenya’s economy, have collapsed due to delayed payments for goods and services supplied to the government. This stifles job creation, reduces tax revenue, and weakens investor confidence in doing business with the public sector.

When pending bills are not cleared on time, the ripple effect extends to the banking sector. Many businesses take loans to finance government contracts, expecting timely payments. However, when these payments are delayed, loan defaults increase, leading to a credit crunch that affects the broader economy.

Budgeting Discipline and Fiscal Responsibility

Prioritizing pending bills as a first charge ensures that government budgets are realistic and sustainable. It prevents unnecessary borrowing to fund recurrent and development expenditures while leaving past obligations unpaid. Budgeting should reflect actual financial commitments rather than create new obligations without addressing existing ones.

This approach also enhances the credibility of government financial management. By institutionalizing the first charge principle, both national and county governments can instill confidence in taxpayers, creditors, and development partners, leading to better financial planning and resource allocation.

Enhancing Service Delivery and Public Trust

When government agencies fail to honor their financial obligations, service delivery suffers. Contractors abandon projects due to non-payment, medical supplies remain undelivered, and infrastructure projects stall. This inefficiency ultimately affects citizens who rely on government services.

Moreover, failure to clear pending bills contributes to corruption and financial mismanagement. Some government officials exploit delays to demand kickbacks for processing payments. Ensuring that pending bills are a first charge reduces opportunities for such malpractices and fosters a transparent financial ecosystem.

For Kenya to achieve fiscal discipline and sustainable economic growth, adherence to the principle that pending bills must be a first charge in budget-making is non-negotiable. National and county governments must fully implement the provisions of the PFM Act and the Constitution to ensure that all financial commitments are honored before new expenditures are undertaken.

Beyond legality, this approach is essential for economic stability, private sector confidence, and effective service delivery. Only through such fiscal discipline can Kenya build a governance framework that upholds integrity, accountability, and long-term prosperity.

(Opinion Piece by Simon Gichuki- National Secretary General, Association of Public Sector General Suppliers.)