Counties to face more financial crisis as Treasury decries revenue shortfall
NAIROBI, Kenya Mar 31 – The cash crisis in the devolved units of the government will continue to persist after the National Treasury admitted that it is facing a financial crisis even as the budget year edges towards a close.
Appearing before the Senate Public Investments Committee, Treasury Principal Secretary Chris Kiptoo revealed that the delayed payment by the exchequer has been occasioned by a downfall in revenue collection.
Kiptoo told senators that the financial crisis is not only facing the county government but the National Government due to a shortfall in revenue collection amounting to Sh67 billion as of Wednesday.
“The position is that there is a delay in exchequer releases because of the revenue performance of our target of about Sh67 billion as of yesterday. We are not sitting pretty, we are working round the clock and we see a possibility that come April and May we will be in a better position,” he said.
In the breakdown given by the Treasury Principal Secretary, the government currently owes state agencies Sh204 billion while the counties are demanding Sh92.5 billion which is the equitable share for the months of January, February, and March.
So far the National Treasury has released the December equitable share to the devolved units
The Ministries Departments and Agencies (MDASs) are awaiting payment of recurrent expenditures of Sh96.5 billion, Development Funds of Sh55 billion, and Pensions totaling Sh53 billion.
“We don’t delay deliberately; it’s just that the cash position cannot allow us to settle quickly. We will have an informal forum with governors and senators to see how to improve on all these,” Kiptoo stated.
The Chairman of the Council of Governors Finance Committee Fernandes Barasa(Kakamega) however questioned the delays despite the exchequer insisting that the government has been facing a revenue shortfall.
“When will the government address the issue of the pending payments because we can’t resolve the issues facing counties in terms of stalled projects if we haven’t sorted out the pending payment? Our issue is not with the conditional grant but the equitable share,” Barasa stated.
Kisii Governor Simba Arati who sits in the Council of Governors Finance Committee decried that the delays in disbursement have led stalling of key development projects within the counties as the monies disbursed have been channeled on recurrent expenditures.
“We have received for December and we have to pay salaries first. I have never paid for any work done, any money I am getting I have to pay salaries. The big problem is in Treasury as long as they delay funds, there will be no development,” said Arati.
Articles 219 of the Constitution and section 17(6) of the Public Finance Management Act, 2012 provides for timely disbursement of equitable share to the devolved units.
The Treasury Principal Secretary explained that the government has prioritized offsetting the current debt owed to different domestic and foreign institutions.
He dispelled the concerns by the Council of Governors that the exchequer had prioritized the financial demands of the National Government at the expense of the counties.
“They are things which come first like we must first pay our debts and we don’t want to hear that Kenya failed to pay its debt. In the month of March, we did over Sh150 billion in paying debt and it’s the biggest component of our revenue,” said Kiptoo.
Senators have however given the National Treasury until April 15 to disburse the funds for January saying the delays in funds disbursement have crippled critical operations in counties insisting the uncertainty in payments will not be allowed.
“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,” Vihiga Senator Goefrey Osotsi said.
In the estimated allocation of Sh200 billion in every financial year to finance development projects, the National Treasury mentioned that they have only released Sh88 billion due to financial constraints.
“From July to now ministries have not received development budget, so it’s not like the government has favored ministries against the counties. That’s not the position,” the Treasury PS said.
Although he remained non-committal on when counties will receive their allocation which has been lagging behind for three months now, he was positive that the country’s financial inflow will improve in a few months.
“This is a month we expect to get more revenue and when we get revenue, I assure you we will pay on time. If our situation improves we want to have a situation that if it delays its only for one month,” Kiptoo said.
The National Treasury pointed out that due to the country’s financial position they have put in place mechanism to turn around the situation through enhancing tax compliances and netting more money from donors to get additional funds.
The government is expecting donor funds from the World Bank through development policy operations and a program with IMF through resilience sustainability facility.
“If we can have greater conservation around expanding the cake rather than sharing the cake. When we share the cake and its small then it’s a problem but if we have conversation about expanding our economy, I don’t think we will have a problem at all paying,”said Kiptoo.
Operations in a number of counties have been stifled following delays in the disbursement of equitable share to County governments for the financial year 2022/23.
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