A National Treasury-appointed task force has proposed the creation of a special government-backed fund to tackle Kenya’s ballooning Sh421.6 billion in verified but unpaid pending bills.
Chaired by Hosea Kiili, President of the Association of Pension Trustees and Administrators of Kenya, the task force recommends the establishment of a Public Pending Bills Liquidation Trust Fund that will issue government-backed bonds to raise money for clearing the debt owed to suppliers, contractors, and service providers.
In a report cited by Business Daily, the task force warns that the growing backlog has eroded investor confidence, strained supplier relationships, and sparked widespread mistrust in the government’s financial credibility.
“The persistent accumulation of verified but unpaid pending bills by public sector entities has created a perceived and growing trust deficit between the Government of Kenya and its suppliers, contractors, investors, and financial partners,” the report reads in part.
The fund is envisioned as a structured vehicle that will securitise future government payments. By converting these obligations into tradable securities, the state hopes to inject immediate liquidity into the economy while giving relief to long-suffering creditors.
According to the proposal, investors would be repaid from government revenues once the debts are eventually settled, offering a market-based solution similar to reverse factoring programs used in countries such as Mexico, Brazil, Colombia, Spain, and India.
Despite the bold proposal, the report falls short of detailing how the bonds will be priced, their tenure, or the safeguards to be put in place in the event of further payment delays from the government.
The move comes as the Kenya Roads Board separately prepares to issue a Sh135 billion bond to offset arrears in the roads sector—pointing to a broader shift toward market-driven strategies to manage public liabilities.
