Counties will have to wait longer to access shareable revenue after senators and the National Treasury failed to agree on whether to slash county funds by Sh20 billion from Sh400 billion to Sh380 billion in the current financial year.

While senators insisted counties should get Sh400 billion as shareable revenue, the National Treasury insisted it could only avail Sh380 billion as the government is broke.

The deadlock came after National Treasury Cabinet Secretary John Mbadi told senators that the proposed allocation of Sh380 billion as county governments’ equitable share is informed by the low ordinary revenue collections attributed to the ongoing geopolitical shocks, increased expenditures for the National Government for purposes of debt servicing as well as shortfalls in revenue collection thus pushing up borrowing and therefore debt stock.

Others are financial constraints due to limited access to financing in the domestic and international financial markets as well as the mandatory expenditures under Article 203 (1) of the Constitution.

While appearing before the Senate Budget and Finance Committee, Mbadi further explained that the country has no money and thus Kenyans must either start living within their means, cut expenditures as well as collect more revenues.

Under collected funds

He said in the last two months the country has under-collected by about Sh18.5 billion which clearly shows that it will be hard to meet the targets agreed upon. “We have been living a lie borrowing to even meet our recurrent expenditures. Annually we borrow around Sh 400 billion which attracts an interest of 11 percent. We have also taken up another Eurobond to fund Eurobond. I believe this is not right at all.”

He added: “The shortfall in the share of National Government revenue has been partly covered by adjustment of budgetary allocations to the Executive, the Legislature, the Judiciary and constitutional commissions in the Financial Year 2024/25.”

Mbadi said that the reduction of Sh20 billion as proposed in the Division of Revenue (Amendment) Bill, 2024 was occasioned by the fact that the projected revenue raised nationally for the financial year 2024/25 dropped significantly by Sh346.00 billion from Sh2,948.12 trillion to Sh2,602.12 trillion due to the revised revenue-raising measures.

Critical expenditure

He said: “In order to bridge the financing gap of Sh 316.72 billion as well as enable the National Government to provide resources towards critical expenditure areas, it is proposed that Sh2,243.42 billion is allocated to the National Government, while Ksh. 380.00 billion is allocated to county governments. This translates to 93.64 per cent of the shortfall being borne by the National Government while counties bear 6.35 per cent of the shortfall i.e. Sh296.60 billion and Sh20.11 billion respectively.”

He however hastened to add that he had written to Attorney General Dorcas Oduor seeking advice on whether to make monthly disbursements of Sh32 billion to county governments to clear the backlog.

But senators who sit in the Senate Budget and Finance Committee told him to his face that they will not allow any further reduction on county funds and instead told him to consider slashing National Government- Constituency Development Funds as well as non-constitutional offices such as offices of the first ladies.

The senators told Mbadi to his face that the National Government should stop legislating and revert back to the Sh400 billion that had been agreed upon before the proposal from the government came following the withdrawal of the finance bill.

The senators led by the chairperson Ali Roba (Mandera) and senators Tabitha Mutinda (Nominated and Vice-chairperson), Bony Khalwale (Kakamega), Richard Onyonka (Kisii) and Eddy Oketch (Migori) told Mbadi to stop saying that the country has no money yet they know that money is being lost in corruption, tax evasion and in other loopholes which ought to be closed.

They said that the non-discretionary items that the Sh 20 billion was to take care of were brought about by the change of policy by the National Government and thus they must be ready to take care of it. The stand taken by senators is likely to lead to mediation between them and MPs should they decline to adopt the proposal to lower the shareable revenue.

Said Mutinda: “The elephant in the room is the Sh380 billion versus the Sh400 billion that we had agreed upon. CS please tell us why Sh20 billion, why not Sh1 billion?”

Roba sought to know how counties will fund discretionary items yet at the moment they have consumed about 39.85 billion. “To suggest anything less to be allocated to counties is unsustainable and unacceptable. How do you expect the county governments to deal with this expenditure?”

Oketch on his part wondered why the National Government was interested in slashing the Sh20 billion which had been included to take care of the non-discretionary items such as pensions, Community Health Workers, and Housing levy among others.

Boni Khalwale told Mbadi to slash the monies from the NG-CDF which the courts have declared unconstitutional and with which they will save about Sh 68 billion sent to the said kitty. He said: “Why is it so easy to make a decision to slash monies from counties and you decline to tell MPs that you will slash their NG-CDF? This kitty this financial year has been given Sh68 billion and the shortfall is equally the same at 61.2 billion, by all means, if you agree with the courts that this fund is unconstitutional then you will have enough money to give to counties.”