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Sh2bn rise in disbursement eases counties' cash crunch

National Treasury building in Nairobi
National Treasury building in Nairobi. FILE PHOTO | NMG 

The Treasury’s disbursements to counties increased by Sh2.1 billion in the six months to December, easing a cash crunch that had threatened to adversely affect service delivery in the 47 devolved governments.

Data published in the Kenya Gazette shows that disbursements increased to Sh117.2 billion from Sh115.1 billion during a similar period a year ago.

The devolved units were starved of cash for three months to September, resulting in delays in paying suppliers and workers’ salaries. The delay was caused by a stalemate over a Bill that guides revenue sharing between the national government and the devolved units.

The first disbursement to the counties was Sh55.5 billion, which hit the counties’ Revenue Fund accounts within a week after the Senate approved a disbursement schedule. The schedule guides the National Treasury in the release of funds and assists counties in making their budgets.

In the latest disbursements, Nairobi got the lion’s share of Sh5.6 billion, followed by Kakamega (Sh3.94 billion) Nakuru (Sh3.93 billion) and Turkana (Sh3.8 billion). Lamu received the least (Sh992 million) followed by Elgeyo Marakwet and Tharaka Nithi at Sh1.42 million and Sh1.46 million respectively. The total equitable share allocation to the counties in the year starting July is Sh316.5 billion.

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Approval of the Division of Revenue (DoR) Bill – which allocates funds equitably between the national and county governments - had been derailed due to a dispute between the Senate and National Assembly over allocations. The Senate later softened its stance and accepted a Sh316.5 billion allocation for counties proposed in the revised bill. Parliament must first approve the DoR to pave the way for passage of the County Allocation of Revenue Bill that determines how much each county gets. The law requires that county governments pass budgets in conformity with County Allocation of Revenue Act and the cash disbursement schedules. The first disbursement to the 47 counties was Sh55.5 billion which was a lumpsum that comprised their share for July, August and September. Despite the release of the cash, more than half the counties did not spend a coin on development activities in the three months to September, slowing down momentum in job creation.

Data from the Controller of Budget (COB) shows that 25 of the 47 counties spent nothing at all on development in the period when the total spend by the devolved units stood at Sh1.94 billion. In all, there was a 45 percent drop on total spend by the counties from the Sh3.51 billion they spent on development activities during a similar period a year ago.

Development spending is critical to building infrastructure like roads and sewerage and putting money in private hands through demand for raw materials, which ultimately creates new jobs.

County authorities are the biggest buyers of goods and services at the grassroots, meaning that reduced spending on projects has a negative impact on job creation.

Statistics by the Treasury show that counties spent nearly a quarter of the funds they received between July 2019 and January 8 on paying debts to suppliers and contractors, helping to ease cash-flow challenges for private companies.

Treasury secretary Ukur Yatani said some Sh33.35 billion was paid out, an equivalent of 23.98 percent of the Sh126.57 billion disbursed to the 47 units in the review period. That aided to clear 59.28 percent of the Sh51.2 billion pending bills validated by the Auditor-General as at June 2019.

President Uhuru Kenyatta had in December put counties on the spotlight for delaying payments to suppliers and the Treasury gave them an ultimatum to pay up before they could receive further funding. The move was meant to ease a shortage of money in the economy.

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