Counties stare at cash crisis as they head to new financial year without funds

County governments are set to begin the 2024–25 financial year without the full release of their equitable share from the National Treasury.

Over Sh62 billion meant for May and June remains unpaid, with Treasury officials confirming the delay will spill over into the next financial year, despite legal requirements for timely disbursement.

Controller of Budget Margaret Nyakang’o confirmed the backlog and expressed doubt that all the funds will be released by the end of June.

“Treasury says they could release the May funds in the last week of the financial year. But they are categorical that June disbursements will be done in the next financial year,” she said as quoted by the Star.

This mirrors last year’s situation, when counties missed out on Sh30 billion by the June 30 deadline, only receiving funds too late for meaningful project implementation.

In the 2022–23 financial year, more than Sh60 billion was released at the tail end, while in 2021–22, Sh30 billion was delayed until August.

The repeated delays have sparked concern among governors, budget watchdogs, and analysts. They say the erratic release of funds is disrupting services, stalling development, and piling up pending bills and audit risks.

“We demand that the National Treasury immediately release the funds owed to counties, failing which, county governments will have no choice but to shut down operations completely,” said Council of Governors chairperson Ahmed Abdullahi.

Nyakang’o’s latest county expenditure report reveals that the delays are pushing counties deeper into debt, with some forced to borrow to keep basic operations going.

By the end of March, counties had borrowed over Sh20 billion, mostly from banks and Saccos. The figure could be even higher, as some counties failed to disclose their borrowing.

With only days left before the new fiscal year begins, pressure is growing on the Treasury to fix its disbursement system.

Under the Public Finance Management Act, the Treasury is required to release the counties’ share of revenue by the 15th of every month. In reality, funds often arrive late, sometimes on the last day of the year.

Treasury blames cash flow problems and competing national demands, but critics argue it is unfairly prioritising national government operations over counties.

Although counties have other income sources, most rely heavily on the equitable share for basic operations, including paying staff.

The continued delays now threaten to reverse progress made under devolution, with experts warning that without urgent reforms to ensure timely, transparent, and fair disbursements, the financial squeeze could cripple county governments.

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