NAIROBI, Kenya, Sep 16 – Counties are facing a looming cash crisis as the National Assembly and Senate clash over the equitable revenue share to devolved units for the current financial year.
The National Assembly has passed the Division of Revenue Bill 2024, approving a revenue share of Sh380 billion, which aligns with the National Treasury’s proposal after the withdrawal of the Finance Bill 2024.
However, senators have remained firm, demanding the revenue allocation to counties be capped at Sh400 billion, arguing that counties cannot operate effectively with any shortfall.
Despite the senators’ stance, the National Treasury insists it lacks the fiscal space to meet the Sh400 billion demand due to revenue shortfalls and increased debt servicing expenses.
Appearing before the Senate Finance and Budget Committee, Treasury Cabinet Secretary John Mbadi explained that the initial Sh400 billion allocation was based on an anticipated revenue of Sh2.9 trillion, which has since been revised down to Sh2.6 trillion due to a shrinking revenue base.
“The proposed Sh380 billion for this financial year is just one per cent lower than the Sh385.4 billion allocated last year. We believe this is in line with the Constitution, which calls for stable and predictable revenue allocations to counties,” Mbadi told the committee.
Senators have fiercely opposed the Sh20 billion cut, highlighting that essential programs tied to non-discretionary expenditures — totalling Sh39.9 billion and linked to national government projects — will be severely affected.
Senate Finance Committee Chair Ali Roba cited government initiatives like the housing levy, county health worker employment, the leasing of medical equipment, and National Social Security Fund deductions as some of the key programs at risk.
“The Cabinet Secretary must understand that these non-discretionary funds, outside the control of the national government, are crucial. The legislation passed by Parliament and national government projections must be respected,” Roba said.
Senate Majority Whip Bonnie Khalwale further escalated the debate, calling for the abolition of the Prime Cabinet Secretary’s office and the elimination of various political, security, and economic advisor roles, which he deemed unnecessary expenses.
“It’s in your hands to cut costs in hospitality and eliminate unconstitutional offices. Why are we funding offices like the Prime Cabinet Secretary and others for spouses? Cut these expenses and divert the funds to where they are needed,” Khalwale argued.
In response, CS Mbadi urged national and county governments to reduce wasteful expenditures, particularly in recurrent spending, such as salaries, allowances, and maintenance costs.
“I disagree with the notion that we have sufficient funds. To meet our expenditure needs, both levels of government must cut unnecessary costs, increase revenue collection, and eliminate wastage,” Mbadi remarked.
NG-CDF Standoff
A potential new flashpoint between the National Assembly and Senate has emerged, as senators push for the withdrawal of the National Government Constituency Development Fund (NG-CDF), arguing it is unconstitutional and the funds should be directed to counties.
The National Assembly had allocated Sh68 billion to the NG-CDF for this financial year, but the amount was revised down to Sh61.2 billion in Supplementary Budget I following the Finance Bill’s withdrawal.
“Why is it easy to cut Sh20 billion from county allocations, but not touch NG-CDF, which has been declared unconstitutional by the courts? If the court ruling was implemented, you would have enough funds for the counties,” Khalwale stated.
Kisii Senator Richard Onyonka underscored that senators would not backtrack on devolution gains, especially while NG-CDF — deemed unconstitutional — continues to receive funds.
“We’ve increased revenue, and we can’t reverse that progress. Just reallocate the NG-CDF monies; we have enough to meet the Sh400 billion demand for counties,” Onyonka added.
The standoff now threatens to delay the passage of the revised Division of Revenue Bill 2024, which splits nationally generated funds between the national and county governments. The bill will now head to a mediation committee comprising members of both houses to seek a compromise.
Source: capitalfm
