The National Treasury has encountered a significant setback in its efforts to have both national and county governments share the financial burden resulting from a shortfall in nationally raised revenues.
The mediation committee of the Senate and the National Assembly, which resolved the deadlock regarding the allocation amounts for counties in the current fiscal year, has dismissed the Treasury’s proposal.
“We, as the mediation committee, have determined that counties will not bear the burden of the revenue shortfall,” stated Kiharu MP Ndindi Nyoro.
Nyoro, who co-chaired the committee alongside Mandera Senator Ali Roba, emphasized that since the National government, via the National Treasury, is responsible for revenue projections and budget drafting, it must absorb any resulting shortfall.
He noted that the national government possesses a greater capacity to manage such shortfalls compared to the devolved units.
This development follows the Treasury’s request to Parliament to reduce the allocation to devolved units by Sh20 billion from the initially planned Sh400 billion, a move prompted by the withdrawal of the Finance Bill, 2024.
The withdrawal, instigated by protests from Gen Z, resulted in a budget deficit of Sh345 billion. Consequently, the Treasury made substantial revisions to the national budget, decreasing it by Sh325 billion and cutting county allocations by Sh20 billion.
The Kiharu MP indicated that the national government has absorbed 93.6 percent of the austerity measures, while counties will only account for 6.4 percent.
Ultimately, the committee reduced the initial allocation to counties by Sh17 billion, bringing it down to Sh387 billion from Sh400.1 billion.
Nevertheless, lawmakers reiterated that in the future, the national government will be solely responsible for covering any shortfalls. In September, the Commission on Revenue Allocation had opposed the Treasury’s attempt to reduce county allocations due to revenue deficits.
Treasury Cabinet Secretary John Mbadi indicated that the nation is functioning within a constrained fiscal environment, attributed to a significant shortfall in ordinary revenue collection amounting to at least Sh316.7 billion in the preceding financial year. This situation has necessitated budget reductions at both tiers of government.
The Cabinet Secretary noted that from a total working budget of Sh2.63 trillion, debt servicing consumes Sh1.1 trillion, while non-discretionary expenditures, excluding salary payments, account for Sh190.4 billion. Additionally, Sh750 billion is allocated for monthly salaries and wages, leaving the Exchequer with a mere Sh531 billion.
