Counties to enter new fiscal year without Treasury disbursements, again

For the second year in a row, county governments are set to cross into a new financial year without receiving full disbursements from the National Treasury, the Star has established.

Controller of Budget Margaret Nyakang’o confirmed that more than Sh62 billion – meant for May and June – remains outstanding, with little hope that the full amount will be released before the June 30, fiscal year deadline.

The delay lifts the lid on deepening fiscal challenges within the Kenya Kwanza administration, which is grappling with mounting public debt and cash flow constraints.

Speaking to the Star, Nyakang’o warned that the disbursement for June will likely spill over into the next fiscal year.

“Treasury says they could release the May funds in the last week of the financial year. But they are categorical that June disbursements will be done in the next financial year,” she said.

This looming rollover echoes similar delays last year, when Sh30 billion was not released before the close of the financial year, again attributed to liquidity issues.

In FY 2022-23, counties received over Sh60 billion at the tail end of the year – too late for effective absorption and implementation of planned projects.

Delayed disbursements from FY 2021-22, totalling about Sh30 billion, were not released until August, two months into the new fiscal year.

These repeated delays have raised alarm among county officials, budget watchdogs and fiscal analysts. They argue that erratic cash releases undermine service delivery, stall development plans and risk accumulating pending bills and audit queries.

“We demand that the National Treasury immediately release the funds owed to counties, failing which, county governments will have no choice but to shut down operations completely,” said Council of Governors chairperson, Ahmed Abdullahi.

In her latest expenditure report for the counties, Nyakang’o exposed how the delay has fueled borrowing by the devolved units, plunging them deeper into debt and attracting millions in interest and bank charges on short-term loans.

Many counties have increasingly turned to commercial bank loans and Saccos to keep their operations afloat, amid the unpredictable release of national funds.

As of March 31, counties had collectively borrowed over Sh20 billion. However, the actual figure may be higher, as some did not disclose their borrowing. 

With just 12 days remaining before the 2024-25 fiscal year begins, pressure is mounting on the Treasury to streamline its disbursement process and ensure predictability in fund flows to devolved units.

Section 17 of the Public Finance Management (PFM) Act, 2012, mandates the Treasury to disburse the equitable share of national revenue to counties by the 15th of every month – a requirement rarely met in practice.

Often, funds are released too late in the financial year, sometimes on the final day.

While the Treasury has repeatedly cited cash flow problems and competing national obligations, critics accuse the Exchequer of unfairly prioritising the national government over counties.

Despite having five legally recognised sources of revenue – including the equitable share, own-source revenue, grants, loans and investments – most counties remain heavily reliant on Treasury disbursements to finance day-to-day operations, including payment of staff salaries.

The growing fiscal squeeze threatens to paralyse county functions and erode the gains made under devolution, unless urgent reforms are implemented to guarantee timely, transparent and fair disbursement of funds.

Despite being the counties’ only hope, the Treasury has ignored the provision, as well as the cash disbursement schedule approved by the Senate every year to guide the monthly disbursements.