Looming shutdown in counties over cash crisis

Counties across Kenya are facing a severe financial crisis that could force them to halt operations entirely by January due to delays in the disbursement of funds from the National Treasury.

According to the Council of Governors (CoG) chairperson Ahmed Abdullahi, counties are yet to receive their Equitable Allocation for the current Financial Year hence crippling operations and provision of essential services.

He noted that with the Treasury yet to release Sh63.6 billion for October and November 2024, counties are now on the brink of exhausting the funds by December.

However, the Cabinet Secretary for National Treasury, John Mbadi told The Standard that the money owed to counties for October was paid yesterday, disputing the claims by the CoG.

“The only arrears that we had was for the month of October, the money which has been released today. Thus, there is no balance owed to counties other than for the month that we are in of November which we commit to pay when the month comes to an end,” said Mbadi.

The CoG maintained that unless urgent action is taken, counties will have no funds to operate by January 2025, forcing them to shut down essential services.

Speaking at a media briefing after holding a meeting to address the ongoing cash crunch, the governors expressed frustration over the prolonged delay in the enactment of the County Allocation of Revenue Act (CARA) for the financial year 2024/2025.

The chairperson said the cash crunch has been further exacerbated by delays in disbursement from the National Treasury.

According to the CoG, counties are currently receiving only 50 per cent of their equitable share based on the previous financial year’s allocation, a temporary measure to ensure continuity until the parliament resolves the Sh20 billion reduction proposal.

Although both Houses of Parliament have passed the bill, Abdullahi said it remains unsigned more than five months into the financial year, resulting in a lack of access to the county's equitable share of revenue.

“Due to these protracted deliberations County Governments continue to bear the brunt as they are yet to receive their Equitable Allocation for the current Financial Year. On the other hand, the National Government continues to receive its shareable revenue as the National Assembly passed the Supplementary Appropriations Act 2024,” said Abdullahi.

Abdullahi took exception to the National Assembly’s decision to slash the counties equitable share by Sh20 billion, warning that this reduction would severely affect service delivery.

“We hold the position that the Supplementary Appropriations Act 2024, based on the Division of Revenue Amendment Bill, is un-procedural and unconstitutional. Such actions are not only an affront to devolution but an overt attempt to weaken and undermine the devolved governance structure enshrined in the Constitution,” he said.

The council called on the Senate to urgently pass the County Allocation of Revenue Act to resolve the funding stalemate.

Further, they demanded that the National Treasury release the outstanding funds to avoid a complete shutdown of county operations.

The CoG also criticised the Controller of Budget for delays in approving the withdrawal of funds, describing the institution’s actions as a bottleneck to accessing the resources.

“We note with great concern the delays by the Controller of Budget to approve requisitions for the withdrawal of funds. This is unacceptable to an institution that is supposed to be facilitative.

“We call upon the Controller of Budget to stop being a bottleneck to this process and ensure counties access their funds in a timely manner,” said Abdullahi.