How Sh188bn debts stalled 580 road projects

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By April last year, when the government decided to borrow billions of shillings using future fuel levies as collateral to pay road contractors, the situation was already bad for many in the roads sector.

At least 580 road projects were stalled when contractors abandoned sites. Companies contracted to supply the government were collapsing under the weight of cash flow challenges, and public distrust was growing.

When Roads and Transport CS Davis Chirchir was summoned to Parliament in July to explain why so many roads had been left unfinished, he acknowledged that the contractors’ protest and desertion had been triggered by non-payment.

“The biggest challenge has always been contractors abandoning projects due to a lack of payment. Regarding potholes and non-motorable roads, we found ourselves in a difficult position because contractors were unwilling to resume work without guaranteed payment,” he told MPs.

He revealed that the government had raised Sh175 billion from the securitisation of part of the fuel levy (Sh7) to pay contractors and avert a crisis.

Pending road bills had reached a peak of Sh188 billion in March last year, accounting for over a third (36.7 per cent) of the national government’s total pending bills at the time.

Debts owed to companies supplying the government with construction materials or participating in road construction increased by 17 per cent to reach Sh171 billion over the year to June 2024, rising by a further Sh17 billion by March last year.

Pending bills for road construction constituted the largest portion of government debt to contractors and suppliers, ranging between 19.3 and 36.7 per cent.

“Some roads have been abandoned for six to nine years. It is true that we need to rebuild them. We will pay attention to all of them across the country. One of the biggest challenges in the past was that contractors abandoned work, citing a lack of payment,” the CS said.

Pending bills have been one of the biggest problems affecting road construction in the country, with road agencies accumulating billions of shillings in debt to contractors and suppliers.

Non-payment has triggered cash flow problems for companies, causing many to fail to honour financial obligations such as servicing loans.

It was only after the government securitised part of the fuel levy that pending bills in the sector started to fall, dropping to Sh132.7 billion by June last year and later to Sh90.9 billion by March this year. By the end of March this year, the national government’s pending bills stood at Sh471.7 billion, with bills owed to contractors and suppliers in the roads sector accounting for 19.3 per cent of this total.

Much of the unpaid bill is owed to companies that supplied the Kenya National Highways Authority (KeNHA) – Sh57.7 billion – followed by contractors and suppliers to the Kenya Rural Roads Authority (KeRRA) – Sh28.5 billion – and the Kenya Urban Roads Authority (KURA) – Sh4.7 billion.

Of these, KeRRA’s bills fell by 63 per cent from Sh76 billion in March last year, meaning the agency benefitted most from the fuel levy securitisation, lowering its debts by Sh47.6 billion in a year. Meanwhile, KeNHA’s outstanding bills fell by 42 per cent from Sh100 billion in March last year, and KURA’s fell from Sh11.87 billion to Sh4.67 billion.

In an audit of Kura for the year ending June 2025, Auditor-General Nancy Gathungu said the state raised Sh175 billion from securitisation of the Sh7 fuel levy. Much of the proceeds (Sh90 billion) were to go to KeNHA, with KeRRA receiving Sh69 billion and Kura Sh13.77 billion.

“The outstanding bills had accumulated interest and penalties totalling approximately Sh20 billion. The government opted to securitise a portion of the fuel levy, specifically Sh7 out of every Sh25 per litre, in order to raise the approximately Sh175 billion required to settle the pending bills,” stated Ms Gathungu.

In February, Martin Agumbi, the acting Director-General of Kenya Roads Board (KRB), said that 580 road projects had stalled due to the pending bills, which had affected the liquidity of companies.

“We had contractors getting into financial difficulty, unable to pay their bank loans. Some were even facing foreclosure, but from April last year, the situation significantly changed because we started making payments,” said Mr Agumbi.

He noted that, after the Cabinet approved the securitisation of the fuel levy to obtain funds for paying contractors, the government began paying off some of the debts owed to companies, in order to encourage them to return to work. Those owed Sh50 million or less were paid in full.

In June, while delivering the budget speech, Treasury CS John Mbadi indicated that the government had settled Sh80.3 billion of pending road bills through the securitisation of the fuel levy.

He said that the pending bills verification committee, formed in November 2023, had analysed 91,911 claims totalling Sh637.6 billion, of which a third were recommended for settlement.

“In the FY 2026/27, the National Treasury proposes a budgetary provision of Sh68 billion to settle the verified bills to suppliers and contractors, owed by the government for amounts of up to Sh100 million. This will also partly settle suppliers/contractors whose pending bills exceed Sh100 million, ensuring that no supplier is excluded,” CS Mbadi said.

Reporting originally appeared via Nation Africa. Read the full source for additional context.