Counties dealt blow on demand for Sh439 billion equitable share

Chairperson of the Budget and Appropriations Committee Ndindi Nyoro. [Boniface Okendo, Standard]

County government's quest for Sh439.5 billion in sharable revenue for the 2024/2025 financial year has been dealt a blow after they were allocated Sh391.1 billion.

The Division of Revenue Bill, 2024, which is currently before Parliament, has proposed a total sharable revenue of Sh2.948 trillion, out of which the national government will receive Sh2.549 trillion while the 47 counties will receive Sh391 billion as the county equitable share.

A further Sh7,852,814,725 has been allocated towards the Equalisation Fund.

The devolved units, through the Council of Governors, had been demanding for Sh439.5 billion allocation in the coming fiscal year, a move that had put the two levels of government at a stalemate.

The Commission of Revenue Allocation (CRA) had recommended that Sh398.14 billion be allocated as equitable share to counties whereas the National Treasury proposed Sh391.1 billion.

The allocation to counties is, however, a Sh16.6 billion increase from the currently enhanced baseline of Sh374.5 billion in the 2023/2024 financial year.

"The Bill proposes to allocate county governments Sh391.1 billion for the financial year 2024/2025 as equitable share of revenue raised nationally, which is an increase from a base of Sh374.5 billion allocated in the Financial year 2023/ 2024," reads the Bill in part

The Bill sponsored by the Chairperson of the Budget and Appropriations Committee Ndindi Nyoro explained that in the 2023/2024 FY, the Division of Revenue Act, 2023, allocated Sh385.4 billion to county governments as equitable share. This allocation included Sh10.9 billion being proceeds from the Road Maintenance Fuel Levy (RMFL) and Sh425 million for transfer of library services.

Nyoro, through the Bill, further defended the proposed county governments equitable revenue share, noting that it was informed by trends in performance of revenue, increased expenditures for national government for purposes of debt servicing coupled with a weakening shilling against the dollar.

Another factor, he said, was the government's commitment to implement a fiscal consolidation plan targeting to reduce the fiscal deficit to 3.9 percent of GDP for FY 2024/2025.

He also cited the low ordinary revenue collections in the country attributed to the ongoing geopolitical shocks. This includes the Russia-Ukraine war and the US Federal Reserve's interest rate hike which has negatively affected the dollar exchange rate against the Kenyan shilling and the international debt market.

The chair also noted that financing constraints due to limited access to finance in the domestic and international financial markets were a key consideration while determining the sharable revenues.