Devolved units began the 2025/26 financial year with sharply muted development spending and directed the bulk of their resources toward salaries and routine operations, according to the Budget Implementation Review Report for the first quarter ended September 2025.
- •The pattern indicates persistent structural weaknesses in subnational public finance, even as annual budgets continue to tilt heavily toward capital investment on paper.
- •In the first quarter, counties spent just KSh 3.69 billion on development, an absorption rate of 2% of the approved annual development budget of KSh 218.99 billion.
- •Twenty county governments reported zero development expenditure during the quarter, effectively postponing capital investment entirely.
These included Baringo, Bomet, Bungoma, Busia, Kericho, Kajiado, Kilifi, Kisumu, Kwale, Laikipia, Mombasa, Siaya, Tana River, Trans Nzoia, Turkana, Wajir, and several others. The absence of development spending across such a large share of counties points to procurement delays, cash-flow constraints, and unresolved pending bills crowding out new projects.
The figure signals a near standstill in project execution during the opening months of the fiscal year, raising the likelihood of compressed spending later in the year and heightened risks of inefficiency.
Isiolo recorded the highest development absorption at 15%, followed by Kirinyaga at 7%, while Machakos, Mandera, Murang’a, Kitui, and Makueni each achieved 5%. Even among these relatively better performers, absorption levels remained well below the pace required to meet annual targets.
While development stalled, recurrent spending moved ahead steadily. Counties spent KSh 51.47 billion on recurrent expenditure, accounting for 93% of total expenditure in the first quarter. This translated to an absorption rate of 13% of the annual recurrent budget, broadly consistent with historical trends but reinforcing the imbalance between operational costs and service expansion.
Within recurrent expenditure, compensation to employees dominated, consuming KSh 43.70 billion, or 79% of total spending. Operations and maintenance accounted for KSh 7.76 billion. A small group of counties posted relatively strong recurrent absorption rates of 20% or higher, including Isiolo, Kitui, Bungoma, Nyeri, and Uasin Gishu, suggesting more effective budget execution capacity. Conversely, 14 counties recorded recurrent absorption rates of 10% or lower, reflecting uneven administrative performance and possible cash rationing.
The poor spending patterns unfolded against the backdrop of weak own-source revenue mobilisation. In the first quarter, counties collected KSh 13.94 billion in own-source revenue, including Facility Improvement Financing, against an annual target of KSh 93.89 billion, representing an overall performance of 15%. This fell well below the 25% benchmark implied by even quarterly collection.
Only ten counties achieved own-source revenue performance of 20% or higher, with Samburu (40%), Narok (35%), and Garissa (36%) emerging as the strongest performers. Their results were driven largely by robust tourism-related revenues in Samburu and Narok and strong Facility Improvement Financing in Garissa, highlighting the importance of diversified and institutionally anchored revenue streams.
At the lower end, six counties recorded own-source revenue performance of 10% or below including Kericho, Siaya, Nandi, Kwale, Kisumu, and Uasin Gishu. In most cases, weak ordinary own-source revenue collections were the primary constraint.
Kisumu stood out as an exception, where Facility Improvement Financing declined following the transfer of Jaramogi Oginga Odinga Teaching and Referral Hospital to the national government after its elevation to a Level Six facility.
The combination of delayed development spending, salary-heavy expenditure, and subdued revenue mobilisation has compounded liquidity pressures across counties. As of the end of September, total county revenue arrears stood at KSh 156.23 billion, while pending bills had risen to KSh 177.46 billion, further constraining fiscal space.
Nairobi City County recorded the highest arrears, totalling Ksh 67.01 billion, (43%) of the overall revenue arrears. Mombasa County reported Ksh 13.54 billion in arrears (9%), Nakuru County had Ksh 13.64 billion (9%), and Kajiado County recorded Ksh 12.91 billion (10%).
