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Revenue dry spell looms at Counties

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County governments face two months of delayed funding after the National Treasury confessed yesterday of a shortfall in revenues on Covid-19 pandemic shocks.

Treasury said in a statement disbursements of funds to counties is lagging behind by two months due to depressed tax revenues.

“However due to the adverse effects of Covid-19 and the subsequent containment measures that have slowed down economic activities, the disbursements to county governments are indeed falling behind by two months,” Treasury said.

Counties will have to freeze their development projects and fall back on bank loans to meet supplement the deficits.

Treasury said it had so far disbursed Sh133 billion to counties for the financial year 2020/21 of which Sh120 billion was disbursed as part the equitable share and Sh13 billion as grants.

Central Bank reserve

Treasury however noted that counties have Sh36 billion balances at the Reserve Bank and urged them to make use of the funds first.

With the reversal of taxes waivers, Treasury said revenues should increase with increasing economic activities.

“With the opening of the economy, and the reversal of Covid-19 tax relief measures, the National Treasury expects tax collection to improve from the current quarter and will prioritise county governments with a view to clearing arrears,” Treasury noted.

The government has so far released 34 per cent of the funds marked for counties, 36 per cent for recurrent 45 per cent after new disbursements were made yesterday

In the exchequer disbursements priority was given to projects in the State Department for Housing and Urban Development and Early Childhood Education with 81 and 60 percent of their development budgets fully released.

The office of the President, Ministry of Foreign Affairs, State Department for Petroleum and Wildlife departments have also gotten over 50 percent of their development expenditure budgets.

This comes a few days after county governments threatened to take legal action over delays in disbursement.

Bomet, Nyamira and Nyandarua have received 40 percent of their total allocations while the rest of the counties have less than 40 percent.

The government has also disbursed Sh485 billion recurrent expenditure with a balance of Sh583 billion left.

Council of Governors Chairman Wycliffe Oparanya on Monday told Treasury Cabinet Secretary Ukur Yattani said  some counties had not received funds since September.

CoG chair

The chairman said counties are unable to pay salaries and contractors among others.

“Please note that if the disbursement is not made forthwith the County Governments will have no option other than seek legal redress while closing down to minimize further damage and suffering to employees,” stated Oparanya.

Kenya is spending nearly half of its revenues on debt servicing squeezing its budget for development.

The 47 County governments were allocated a total of Sh378.1 billion, out of which Sh316.5 billion were meant for equitable share and conditional grants by the national government.

In summary

    • Treasury has blamed the evolving Covid-19 virus for the delayed disbursement of funds to county governments which have since fallen behind by two months.
    • The delays in budget allocations were also due to the prolonged delay in the passage of the division of revenue formula, necessary for sharing of funds in the counties by the Senate.
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