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Economy

Six counties face Sh1bn cut in new revenue share plan

Six counties would have their current
Six counties would have their current allocations reduced due to introduction of new parameters in the sharing of revenue. FILE PHOTO | NMG 

Six counties will lose more than Sh1 billion each if the new formula proposed by the Commission on Revenue Allocation (CRA) to guide how devolved units will share revenues from next financial year is adopted by Parliament, two lobby groups have told Senators.

The Institute of Certified Public Accountants (ICPAK) and International Budget Partnership (IBP) Kenya said the six counties would have their current allocations reduced due to introduction of new parameters in the sharing of revenue.

IBP Country Manager Abraham Muriu, however, said allocations to Nakuru and Uasin Gishu counties would rise by Sh1.52 billion and Sh1.22 billion respectively.

He said Isiolo County allocation would be reduced by Sh221.9 million despite an increase in population from 143,294 in 2009 to 267,997 in the recently released 2019 population census.

Mandera County will suffer the highest cut in its share of revenue allocation by Sh1.94 billion. It will be followed by Mombasa (Sh1.8 billion), Kilifi (Sh1.7 billion), Wajir (Sh1.5 billion), Marsabit (Sh1.3 billion) and Kwale (Sh1.05 billion).

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"The current proposal is a significant shift in how needs are measured. It separates service delivery parameters, those meant to address development or infrastructure deficits and those meant to incentivise fiscal discipline," Mr Muriu told the Senate Committee on Finance and Budget.

The committee, chaired by Mandera Senator Mohamud Mohamed is listening to stakeholder views on the CRA's third-generation formula for sharing of revenue among the 47 devolved units.

The CRA has set revenue share to the counties at 26 percent -- 18 percent on poverty index and eight percent based on geographical size of a county, while one per cent will be based on the level of development in each devolved unit.

The health sector has been assigned a weight of 15 percent. The agricultural sector has been allocated 10 percent weight, water has been assigned three per cent, and all other county functions have been assigned 18 percent.

The CRA had earlier said revenue allocation would be shared based on a qualitative analysis of each county's needs to ensure equity, help the poor ones catch up with the rest, and take into account the outcomes of previous investments.

Devolved units that increase internal revenue collection will get a higher allocation.

"Fiscal discipline is the only performance-based parameter that acts as an incentive for improved management of devolved resources. The institute supports the proposed formula as provided by the commission," said ICPAK.

The accountants want counties that realise below 50 percent of their projected revenue targets out of own sources to gain nil allocation.

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