County governments are owed a total of Sh143 billion in unpaid revenue, a situation that exposes major gaps in tax collection systems as they struggle to fund essential services and development projects.
According to a new report by Controller of Budget Margaret Nyakang’o, as of December 31, 2025, the debt included Sh101.54 billion from counties’ own-source revenue, while the remainder was linked to debts from the Social Health Authority (SHA), formerly the National Health Insurance Fund (NHIF), as well as other public institutions.
The report shows that many counties are facing a heavy financial burden driven by poor revenue collection, delays in disbursements from the national government, and rising recurrent expenditure.
This situation directly affects service delivery to citizens and undermines long-term development plans.
A large portion of the uncollected revenue comes from land rates, housing taxes, and various county fees, some of which have remained uncollected for five to ten years without proper follow-up.
The lack of firm legal and administrative action has contributed to the continued growth of these debts.
Governance analysts say that this amount of money could significantly transform development in the country if it were properly collected.
It could fund the construction and renovation of level four and five hospitals, improve road infrastructure, and support water projects in many areas.
However, many counties have not established strong debt collection systems, instead relying on allocations from the national government, which are often delayed.
Additionally, political decisions have weakened financial discipline, especially where some counties issue waivers on land rates and housing debts, particularly in the run-up to the 2027 general elections.
Nairobi County leads with the highest arrears, claiming Sh65.39 billion, which is about 45% of the total outstanding amount.
This includes Sh55.4 billion in land rates, as well as housing taxes and business permit fees. The Kenya Power company alone owes the county Sh5.6 billion in wayleave fees.
Mombasa County follows with Sh14.51 billion, while Nakuru County is owed Sh13.84 billion—an amount more than four times its annual own-source revenue.
This raises concerns about the county’s financial sustainability, especially considering that salaries alone are estimated at Sh7 billion per year.
Other counties with significant arrears include Kiambu (Sh5.61 billion), Kakamega (Sh2.83 billion), Kisumu (Sh2.32 billion), Kitui, and Kisii, indicating that the problem is widespread across the country.
On the other hand, some counties have shown signs of better revenue control. Homa Bay County reported only Sh23.27 million, while Murang’a County had Sh40 million in arrears, demonstrating that strong monitoring systems can yield positive results.
Overall, more than three-quarters of counties have not met their own-source revenue targets, despite having the potential to collect up to Sh260 billion annually, according to the Commission on Revenue Allocation (CRA).
In the 2024/2025 financial year, counties collected Sh67.3 billion against a target of Sh87.67 billion.
Ms. Nyakang’o recommends urgent measures, including strengthening revenue collection systems, using digital technology to track revenue, and enhancing collaboration with institutions like SHA to recover debts.
Without these reforms, she warns, counties will continue to face financial challenges that will weaken service delivery to citizens.
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