Parliament to vote on Sh346bn budget cuts for national and county governments

The national and county governments will receive Sh346 billion less of the share of revenue raised nationally if the National Assembly approves the Division of Revenue (Amendment) Bill, 2024.

The draft, which was tabled in parliament on Wednesday, proposes cuts at both levels of government in proportion to the revenue gap caused by the withdrawn Finance Bill 2024.

"The projected revenues raised nationally for the financial year 2024/25 have dropped significantly, due to the revised revenue-raising measures occasioned by rejection of the Finance Bill, 2024, from the initial projected revenue of Sh2,94 trillion to revised projected revenue of Sh2.6 trillion," the report by Budget and Appropriations Committee reads.

The national government's share of revenue raised nationally has thus been adjusted downward by Sh325.88 billion.

The committee however explains that 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 current financial year.

The bill also recommended reducing county governments' equitable contribution by Sh20.12 billion.

This translates to 5.81 per cent of the projected shortfall in total shareable revenue.

"Clause 3 of the Bill amends section 5(1) of the Division of Revenue Act, 2024 to provide for sharing of the shortfall in revenue raised nationally between the national and county governments equitably," the bill reads.

The clause also provides for capping the proportion of revenue shortfall to be borne by county governments which shall not be more than 15 per cent of the shortfall, to ensure stable and predictable revenue allocation in line with Article 203 of the Constitution.

"Clause 4 of the Bill deletes the Schedule to the Division of the Revenue Act on allocations of revenues raised nationally between the national government and county government and replaces it with a new Schedule which reduces the equitable share county governments from Sh400.12 billion to Sh380.00 billion, and reduces the equitable share to the National Government from Sh2,5 trillion to Sh2.21 trillion."

The revised allocation of Sh380 billion to county governments translates to 24.20 per cent of the last audited and approved revenues of the government for the financial year 2020/21, which is above the Constitutional threshold of 15 per cent.

The Division of Revenue (Amendment) Bill, 2024 was tabled in the National Assembly on July 24 by Ndindi Nyoro, the chairperson, of the Budget and Appropriations Committee.

Ideally, the principal object of this bill is to provide for equitable sharing of the revised sharable revenue raised nationally by the national government and county governments.