Counties hit as Treasury disbursements fall Sh41bn

The National Treasury building in Nairobi. PHOTO | DIANA NGILA | NMG 

By LYNET IGADWAH

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Summary

• Counties received Sh116.2 billion in a similar period the previous year and the Sh31.5 billion cut this year has delayed payments to suppliers, workers’ salaries and stalled projects.
• Delayed exchequer releases have added to suppliers’ and contractors’ misery as county governments refuse to pay debts that have accumulated to Sh90 billion.
• The counties endured a four-month of cash crunch as the executive struggled to reconcile the differences between the County Allocation of Revenue Act (Cara), 2017 President Uhuru Kenyatta signed, and the disbursement schedule approved by the Senate.

Treasury disbursement of funds to the counties dropped by nearly a third to Sh84.6 billion in the six months to end of December 2017, slowing down business and job creation in the devolved units.
Counties received Sh116.2 billion in a similar period the previous year and the Sh31.5 billion cut this year has delayed payments to suppliers, workers’ salaries and stalled projects.

Delayed exchequer releases have added to suppliers’ and contractors’ misery as county governments refuse to pay debts that have accumulated to Sh90 billion.

In the draft 2018 Budget Policy Statement, the Treasury singled out pending bills as a major factor in the weakening of activity in the small and medium enterprise (SME) sector.

“The growing stock of expenditure arrears, especially pending bills due to suppliers and contractors, is potentially a factor behind struggling small and medium-sized enterprises – such as hotels, travel agencies - many of which borrow to finance their operations,” the Treasury said.

The counties endured a four-month of cash crunch as the executive struggled to reconcile the differences between the County Allocation of Revenue Act (Cara), 2017 President Uhuru Kenyatta signed, and the disbursement schedule approved by the Senate.

READ: Treasury set to disburse Sh77.4 billion to counties

The anomaly, which has since been rectified, meant that the Treasury could not release funds to counties. At the close of the first quarter that ended in September, none of the 47 devolved units had received funds, which compelled the Treasury to loan them Sh20.3 billion to pay workers’ salaries.

In the period to December, Nairobi got Sh7.7 billion, topping the list of counties with highest allocations, followed by Kiambu’s Sh4.3 billion, Kakamega’s Sh3.4 billion and Kilifi’s Sh3.2 billion.

The list of counties that received less than Sh1 billion includes Elgeyo Marakwet (Sh530.5 million), Nyeri (Sh773.3 million and Isiolo (897.7 million).

Total allocation to the counties in the current financial year stands at Sh329.96 billion, which consists of the equitable share of national government revenue, conditional grants from the State and conditional loans and grants from development partners.

MPs in the previous (11th) Parliament agreed to allocate the 47 counties Sh302 billion in the Division of Revenue Bill, saving counties an impending operation crisis in the current financial year. Parliament must first approve the Division of Revenue Bill to pave the way for passage of County Allocation of Revenue Bill.