NAIROBI, Kenya Nov 22-The Intergovernmental Budget and Economic Council (IBEC) has approved Sh370 billion for counties, rather than the proposed Sh751.45 billion, for the 2022-2023 financial year.
The council, chaired by Deputy President William Ruto, has instead supported the recommendation by the Commission of revenue allocation and the National Treasury to have the monies capped at 370 billion as the financial year of 2021/2022 citing public debt and covid-19 situation.
“After discussions and considering many factors including our debt levels and other alternative measures of raising revenue are not tenable, the council with the concurrence of the council of governors have approved last year level of 370 billion be the amount due to counties,” Ruto told a news conference after the meeting.
The consensus at the 7th IBEC level meeting which comprises of Council of Governors, Treasury and CRA has now created an avenue for fast-tracking the approval of the Parliament of Division of Revenue Act thus enabling timely commencement of budget implementation between the National government and the county government as we head to the elections next year.
“Let’s appreciate the situation we are in as country and tighten our belts to ensure we don’t exceed commitment that cannot be funded by revenues and other measures the government is undertaking,”
The Council of Governors had the proposal of having the monies to counties capped at Sh751.45 billion and backed the proposal on the Constitution of Kenya (Amendment) Bill, 2020 commonly known as the Building Bridges Initiative Bill.
The Bill proposes an allocation of 35 per cent of the total revenue by the Kenya Revenue Authority. The bill was however squashed by the High Court and the Court of Appeal terming it illegal and unconstitutional. The bill is currently pending in the Supreme Court after an appeal was filed.
IBEC has agreed on recommendation by CRA, Auditor General and the Controller of Budget on the management of pending bills so that they don’t interfere with the delivery of services in the devolved units.
“We have agreed they will be a meeting chaired by Controller of Budget that will include the Treasury, Auditor general and Council of Governors on how pending bills can be managed by successive administration and where they are huge pending bills a mechanism be recommended by the sub-committees on how they can be dealt with,” said Ruto.
Since the onset of devolution, county governments have been reeling under the weight of pending bills, which at times have been a cause of conflict with the national treasury.
Treasury said the delay in payment of pending bills has dealt a blow to businesses and the economy at large insisting that strict measures would be taken against entities that will fail to head the deadline.
IBEC has also given a green light for counties to borrow loans by a sub-national government entity. Laikipia county will be the first to reap from this agreement having floated a loan of Sh1.16 billion infrastructure bond.
The IBEC council agreed that the loan will be guaranteed by the county government and the county assembly. The regulation under the Public Finance Management has been amended to pave way for counties to borrow.
“We have been working on the framework for the last three years and Laikipia county becomes the first county to meet the rigorous criteria set out for counties to meet so that they can borrow. The borrowing will be for the productivity of counties you cannot borrow for recurrent expenditures,the law is clear on this,” Ruto said.
Previously, counties could borrow cash from banks for recurrent expenditure, but there was no provision for long-term development borrowing.
