County governments across the country are under renewed scrutiny following revelations of a massive pension debt burden, with a Senate-commissioned taskforce warning of escalating financial risks tied to unpaid retirement obligations.
According to findings presented in a recent report by the Senate County Public Accounts committee, a Multi-Agency Technical Taskforce (MATT) identified a staggering pension liability owed by county entities.
The Moses Kajwang’ led committee report states, “County Governments comprising the Executive, Assembly and Water Services Boards owe pension schemes a total of Sh.115.7 billion, inclusive of principal, interest, penalties, and the actuarial deficit.”
The debt is heavily concentrated within county executives, which account for the bulk of the arrears with the taskforce noting,“The debt composition is Sh.103.2 billion by the County Executive which is 89 percent, Sh. 9.2 billion by Water Service Providers which is 8 percent and Sh.3.2 billion by the County Assembly which is 3 percent.”
The report traces the origins of the crisis to both pre- and post-devolution periods, highlighting a sharp increase in liabilities over time.
‘’Pension debt had accumulated over the years from Sh. 21.3 billion (18 percent of the total unremitted funds, inclusive of interest, penalties, and actuarial deficit) relating to the defunct Local Authorities, which accrued during the pre-devolution period, was transferred to Ksh. 115.7 billion (82 percent of the total unremitted funds) as at 31st October 2024.” The report notes.
The committee has pointed out fiduciary risks in several counties. “The total aggregated specific fiduciary risk related topensions and pension arrears amounts Sh. 3,932,745,989.”
Specific counties were singled out for major pension-related liabilities, including Nyeri, Narok, and Bomet, with issues ranging from unremitted contributions to irregular salary payments.
In one instance, the report highlights “Irregular Payment of Salaries and Personal Allowances (including overpayment of basic salary to former local authority staff, which constitutes a pensionable liability) and Unremitted Retirement Benefits Contributions amounting to Sh. 1,911,131,070.”
To address the growing crisis, the committee noted that, ‘’All County Governments must provide a certificate of compliance from county pension schemes as proof of payment or non-payment of previous year’s budget pension deductions to the Controller of Budget before release of Funds.”
Further, counties will be required to align their budgets with structured repayment plans. “All County Governments and their entities must prepare and approve budgets that are consistent with the repayment plans.”
The report has further set out clear timelines proposing for settling outstanding debts. For smaller liabilities, the report states, “A County Executive with a pension debt of 300 million or less shall repay the pension debt within one Financial Year effective FY 2026/27.”
Meanwhile, larger debts will follow a phased approach, “A County Executive with pension debt of Sh. 1.5 billion and below shall with effect from the financial year 2026/27 make annual payments of at least Sh. 300 million per year over a period of 5 years or until full settlement, whichever comes first.”
