NEXT FINANCIAL YEAR

Governors reject CRA proposal to retain Sh370bn allocation

Commission suggests county equitable share be stagnated due to tough economic times

In Summary

The proposal, which is contained in the draft Division of Revenue Bill, 2022, is, however, subject to approval by Parliament.

In the current financial year, all the 47 county governments were allocated Sh370 billion inequitable revenue.

Laikipia Governor Ndiritu Muriithi during an interview with The Star at Panafric Hotel on Wednesday, August 25, 2021
Laikipia Governor Ndiritu Muriithi during an interview with The Star at Panafric Hotel on Wednesday, August 25, 2021
Image: MOSES MWANGI

Governors have rejected a proposal by the Commission on Revenue Allocation to retain county allocation at Sh370 billion in the next financial year.

The commission has suggested that the county equitable share of revenue be stagnated due to tough economic times, triggering a fierce reaction from the Council of Governors.

The proposal, which is contained in the draft Division of Revenue Bill, 2022, is however subject to approval by Parliament.

“We reject the proposal by CRA that recommends a none-increment to the county equitable share which is Sh370 billion,” COG said in a statement signed by its Finance committee chairman Nderitu Muriithi.

In the current financial year, all the 47 county governments were allocated Sh370 billion in equitable revenue.

The allocations followed a protracted debate in the Senate, marked by standoffs, arrest and allegations of intimidation over the third generation revenue sharing formula.

The senators had clashed over the formula with those whose counties were losing revenue opposing it.

It took the intervention of President Uhuru Kenyatta to unlock the stalemate.

He pledged to increase the allocation to Sh370 to ensure no county losses.

In 2020-21, the devolved units got Sh316.5 billion.

CRA says slow economic growth, constrained fiscal framework, the need to contain the public debt and the need to finance and provide security for the 2022 General Election informed its recommendation.

However, the county chiefs argued that the CRA’s proposal does not reflect and is not commensurate to the growth in revenue for the FY 2022-23.

The Treasury projects revenue to grow to Sh2.14 trillion from the current Sh1.80 trillion.

“Given the country’s economic situation, there is a need for economic stimulation as a measure to spur economic recovery and growth. This will only be achieved through increased resources to counties,” Mureithi said.

The Laikipia governor said allocation to counties should not be affected by the factors listed by the commission, adding any revenue shortfall should be borne by the national government.

The Kenya Revenue Authority has been struggling to meet its revenue targets amid the rising revenue needs, forcing the Treasury to revert to borrowing to bridge the budget deficit.

As of June 30, the county public debt stood at Sh7.71 trillion with the state borrowing about Sh1.2 trillion in the last financial year alone.

Covid-19 worsened the situation.

Treasury CS Ukur Yatani has often admitted that the pandemic has taken a heavy toll on the economy.

“We would like to reiterate proposals contained in the Constitution of Kenya (Amendment) Bill which recommends that counties should not be allocated less than Sh35 per cent of all the revenue collected by the national government,” Muriithi said.

“We propose that the CRA reviews their proposals for the equitable share of the revenue for the FY 2022-23 and increase the allocation to the county governments.” 

 

Edited by Kiilu Damaris