Kenya in serious financial crisis, Treasury CS Yatani now admits

Treasury to release Sh39 billion to counties on Friday to avert shutdown

In Summary

•Yatani promised to release Sh39 billion to counties by Friday to avert a looming shutdown.

•He pledged the disbursement when he appeared before a Senate committee on Tuesday to explain the delayed releases.

Treasury Cabinet Secretary Ukur Yatani at Parliament Buildings on June 11, 2020
BUDGET: Treasury Cabinet Secretary Ukur Yatani at Parliament Buildings on June 11, 2020

Treasury CS Ukur Yatani has promised to release Sh39 billion to counties by Friday to avert shutdown as he lifted the lid on the financial crisis hitting the government.

Yatani pledged the disbursement when he appeared before a Senate committee to explain the delayed releases, just a day after governors threatened to shut down the devolved units for lack of funds.

They decried delayed cash disbursements amounting to Sh102 billion that has accumulated since January and affected critical services, payment of salaries and statutory deductions and clearance of pending bills.

On Tuesday, Yatani came under fire from members of the Senate Finance and Budget Committee for treating counties like "stepchildren" while national government operations run normally.

“Counties are easily being treated like a stepchild in Kenya. We cannot continue like this. People are going to give up on devolution and shut down counties at some point,” Makueni Senator Mutula Kilonzo Jr said.

Bungoma Senator Moses Wetang'ula questioned why the national government seemed to be operating optimally when counties had been subjected to suffering.

“If you look at what is going on at national government, it is business as usual; military is working, Treasury and Parliament are working but counties are under very severe stress,” the lawmaker said.

Yatani denied any preferential treatment in the release of the funds before going ahead to spill the beans on the financial crisis cutting across the government in the wake of Covid-19 pandemic taking a heavy toll on revenue performance.

“Just because we are giving priority to Parliament and Parliamentary Service Commission, you can think that the rest are also smiling. We have serious issues,” the CS said.

“There is no preferential treatment. It is a challenge of revenue performance as a result of slowed down economic activities. This is not only unique to the counties. We have challenges disbursing funds to MDAs. We are really falling behind,” he added.

Yatani told the committee chaired by Kirinyaga Senator Charles Kibiru that the government faces serious cash flow challenges that have affected operations across the ministries and agencies and the county governments.

Revealing the frustrations and the extent of the dire situation, the CS, who last week unveiled the country’s biggest ever budget of Sh3.6 trillion, said implementation of various government projects has fallen behind as is the disbursement to counties.

“I just want to confirm to you, as at today, our funding sources and quite a number of windows have not been realised,” he told the committee.

The CS, disclosed that the Treasury has pending Exchequer requests running into billions of shilling that it cannot fund because of cash problems.

Though he did not divulge the total amount his ministry is yet to release to national government agencies, the Treasury’s pending disbursements to counties stood at Sh98.1 billion yesterday.

The funds comprise outstanding balance for Nairobi, which has accumulated since January, Sh14.4 billion for some 25 counties for March and allocations for April, May and June for all the 47 devolved governments.

On Monday, Council of Governors chairman Martin Wambora said the outstanding releases stood at Sh102.6 billion.

“Unfortunately, if the National Treasury fails to release the required funds, counties will not be able to offer basic service thereby forcing suspension of services or a total shut down by June 24, 2021,” Wambora said.

But Yatani said his ministry released Sh4 billion on Monday evening, leaving a balance of Sh98.1 billion, with 13 days left to the end of the financial year.

Yesterday, the CS said it would be a challenge for his ministry to release the entire amount by June 31, going by the revenue performance.

“My undertaking is that we will clear pending of months of March and part of May. For May, I cannot authoritatively tell you how it is going to behave. It will be subject to inflow and trickling of revenues,” he said.

The CS added, “It is most likely that the disbursement for June will go into the next financial year,” he told the nine-member panel.”

Yatani took issue with some counties, which he said have about Sh21 billion lying idle in their accounts at the Central Bank.

“It is clear that if you can’t spend your money, then something is not right, either you are failing to pay bills or you are not implementing,” he said.

He waded into the emotive issue of pending bills, saying the accumulation of debt was hurting SMEs and by extension the economy.

“Alongside the auditor general, we have constituted a team that will got to the counties and verify these pending bills,” he said.

Yatani downplayed a suggestion to ring fence counties through special funds advanced by the Central Bank, saying such a move would amount to taking a loan.

But the CS came under criticism from the committee, with members questioning the rationale of the Sh3.6 trillion 2021-22 budget he unveiled when the economy is struggling.

“If you are underperforming in revenue collection and you are under stress, how come the budget you presented is growing and not shrinking?

“You now hit Sh3.6 trillion in a situation revenue collection is underperforming, loan repayments are becoming a pain in the wrong place for you,” Wetang'ula said.

The CS said he would react to the concerns in another session, adding that a budget is a product of a consultative process based on the prevailing situation and projections.

Edited by Henry Makori