Without a new revenue framework, counties face cash crisis in January
By Maureen Kinyanjui |
Mbadi has warned that the Exchequer will complete the transfer of this backstop threshold amounting to Sh192.5 billion by the end of December.
Counties are at risk of a severe funding crisis in the new year unless Parliament reaches an agreement on a new funding framework for the devolved units by the end of December.
The National Treasury has been relying on a backstop measure to fund counties, allowing them to receive at least 50 per cent of the approved allocation from the previous financial year (2023-24).
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However, Treasury Cabinet Secretary John Mbadi has warned that the Exchequer will complete the transfer of this backstop threshold amounting to Sh192.5 billion by the end of December.
"This will leave behind a funding gap of at least Sh187.5 billion, with the devolved units entitled to at least Sh380 billion in equitable share transfers from the national government by June 2025,” Mbadi said.
He explained that without the passage of the Division of Revenue (Amendment) Bill, 2024 and the County Allocations Bill, 2024, the government will have no room to make additional transfers to counties.
"We still have about Sh60 billion to transfer this month and next month to make it about Sh190 billion, which is the farthest we can go until the bills are passed," Mbadi said.
So far, the Treasury has transferred Sh127.1 billion to counties after seeking legal advice from the Attorney General regarding the legality of transfers outside the provisions of the Division of Revenue Bill and the County Allocations Bill.
These funds cover allocations for the Financial Year 2024-2025, and an additional Sh30.8 billion has been transferred to clear arrears for the FY 2023-2024.
"The moment we got the legal opinion in September, we started releasing the money to counties immediately. What we did was give full monthly allocations without pro-rating the disbursements in half," Mbadi said.
In September, the Treasury sought legal guidance from the Attorney General on how to manage county funding in case there were delays in the approval of the necessary revenue bills.
The Attorney General advised that county governments should receive up to 50 per cent of the approved allocation from the previous year while awaiting the passage of the bills.
The Treasury had initially considered making amendments to formalise the Attorney General's advice but later determined that legislative changes were unnecessary.
However, the situation was complicated when the Finance Bill, 2024, was withdrawn, leading to a new revenue gap and requiring a reduction in planned transfers to counties.
As the December deadline looms, the pressure is mounting for Parliament to pass the required Bills to ensure counties can continue to operate smoothly in 2024 and beyond.
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