Cash crunch in counties set to persist

Treasury Principal Secretary Chris Kiptoo

Treasury Principal Secretary Chris Kiptoo responds to questions from members of the Senate County Public Investment and Special Funds Committee at Parliament Buildings in Nairobi on March 30, 2023.

Photo credit: Lucy Wanjiru | Nation Media Group

The cash crisis in county governments is set to continue with the total the national government missing its revenue targets by Sh67 billion.

The devolved units are yet to receive their equitable share of the revenue for the past three months.

National Treasury Principal Secretary Chris Kiptoo said the government is facing a financial crisis as the National Treasury struggles to raise funds for disbursement to counties, ministries, departments and agencies (MDAs).

The PS had been summoned by lawmakers over the Exchequer’s failure to release the equitable share of revenue to the county governments, which was last done in December last year. The governments are owed Sh31.45 billion each for January and February and Sh29.6 billion for March.

Appearing before the Senate County Public Investment and Special Funds Committee yesterday, Dr Kiptoo pointed out that the revenue shortfall means that there will be delays in remittance to the devolved units.

The PS told the Vihiga Senator Godfrey Osotsi-led committee that the Exchequer owes counties Sh92.5 billion for the past three months and Sh204 billion to MDAs.

In the breakdown for the MDAs, he said they are awaiting payment of recurrent expenditures of Sh96.5 billion, development funds of Sh55 billion and pension amounting to Sh53 billion.

He explained that Treasury prioritises public debt repayment as well as statutory payments such as pension, which form the first charge on the Consolidated Fund, taking at least 65 per cent of revenue raised by the national government. Dr Kiptoo told the committee that for instance, the Treasury spent Sh150 billion to repay public debt in the month of March alone.

He, however, added that they are working hard to raise revenues through tax administration and tax compliance, revealing the Treasury will next month “get a good amount of money from the World Bank”.

“We admit there is a delay in Exchequer releases because of the revenue shortfall of about Sh67 billion as of yesterday,” said the PS. “We are not sitting pretty but we are working round the clock and we see a possibility of come April and May we will be in a better position. We are moving systematically to sort out the remaining payments and disbursements to national and county governments.”

No excuses

Council of Governors Finance Committee chairperson Fernandes Barasa would have none of the revenue shortfall excuses, asking the PS when the government will address the issue of the pending payments.

“We cannot resolve issues facing counties in terms of stalled projects if this issue of pending payment is not sorted out. Our issue is with the equitable share,” said the Kakamega governor.

Kisii Governor Simba Arati added that the delays in disbursement have resulted in stalling of key development projects within the counties as the monies disbursed go to recurrent expenditure.

“I have never paid for any work done because the money I get goes to paying salaries. The December disbursement I received, for instance, went to paying salaries,” said Mr Arati.

Dr Kiptoo defended the government saying the current cash crunch cannot allow the Exchequer to settle the outstanding debts. He also dispelled claims by governors that the Treasury has prioritised the financial demands of MDAs at the expense of the counties.

The senators gave the Treasury until April 15 to disburse the funds for January.

“It’s not fair that the Senate passes a disbursement schedule after consultation and the schedule is disregarded. You have asked for time and we will give you until April 15 to have January dues paid,” said Mr Osotsi.

He said the Treasury had breached the constitution, the County Allocation of Revenue Act and the cash disbursement schedule that requires monies to be released to counties by the 15th of every month.