Row looms as Treasury proposes Sh317.8bn for counties

A showdown looms between the National Treasury and senators and governors over the proposal that counties will get Sh317.8 billion as the share of national revenue.

The senators, in a row with their National Assembly counterparts last year, proposed that counties get Sh335.67 billion as the share of the revenue.

The Commission on Revenue Allocation recommended to Parliament an allocation of Sh321.7 billion to the counties.

The senators further sought that the Division of Revenue Bill, 2020 - which spells out the allocations, to be passed before the budget is read.

Before settling on Sh316.5 billion after months of intense negotiations, the lawmakers demanded the removal of Sh6.2 billion allocation for leasing medical equipment.

They further sought an increase of donor allocation by Sh385 million, money they demanded to be factored in the 2020-21 financial year budget.

But the draft 2020 Budget Policy Statement (BPS) – published on Friday, proposes an allocation of Sh317.8 billion share of revenue to the counties.

Treasury Cabinet Secretary Ukur Yatani has defended the allocation attributing it to revenue underperformance and the need for sustainability.

“This is specifically against the backdrop of escalating pressure occasioned by debt repayment, pensions and gratuities – and some salaries for independent offices and commissions,” the BPS reads.

If approved, counties would get Sh371.9 billion in total, part of which is Sh7 billion for leasing medical equipment and Sh900 million in user forgone fees – which the senators opposed.

The Treasury further intends to allocate Sh4.3 billion to counties for referral hospitals, Sh300 million for building headquarters, Sh2 billion for village polytechnics, and Sh9.4 billion from fuel levy.

Pressed by a Sh569 billion budget deficit amid Sh137 billion missed revenue target as of December, President Uhuru Kenyatta’s administration has vowed to sustain austerity measures.

The government cut spending on foreign trips, office teas, newspapers and vehicle fleet for state workers. It also froze hiring.

The draft BPS shows the government will spend Sh121 billion less – being Sh2.74 trillion from the current Sh2.84 trillion.

Of this amount, Sh1.8 trillion will be set aside for recurrent costs with only Sh576 billion left for development.

To finance the budget gap, there are intentions to borrow Sh247.3 billion externally, Sh318.9 billion internally and Sh3.2 billion from other domestic receipts.

The Executive is projected to get Sh1.81 trillion, the Judiciary  Sh13.7 billion, and Parliament Sh36.2 billion. About Sh580 billion is proposed for the Consolidated Fund.

Owing to the tough economic times in the country, Yatani reiterated that the brutal cuts will be sustained.

He further states in the BPS report that spending will be prioritised for Big Four projects – Health, Food Security, Manufacturing and Affordable Housing.

“The government is committed to implementing priority programmes under the third medium-term plan to achieve the aspirations of Kenyans as outlined in the Vision 2030,” the report states.

In further measures, Yatani says next year’s focus will be on ensuring that public spending leads to high quality outcomes.

“Consequently, the medium-term spending will continue to focus on the quality and most critical needs of the country,” the report reads.

Big Four, which President Kenyatta intends to use as his legacy, has been hit with a funding crisis which has seen most of its flagship projects take a backstage.

Health is struggling despite the rollout of Universal Health Coverage, a situation aggravated by the high turnover of leadership at the sector.

Mutahi Kagwe – the Health Cabinet Secretary nominee, will be the fourth to head the ministry after James Macharia, David Mailu and Sicily Kariuki.

Manufacturing is yet to pick up amid reports of further job losses as companies close shop citing tough business environment created by heavy taxation.

Apart from the death of key flagship projects that were to deliver the food security agenda, the sector is further threatened by locust invasion.

The government’s plan for 500,000 housing units has also run into headwinds with signs showing the targets may not be reached by 2022 – end of Uhuru’s term in office.

Adding to the funding woes is that the Kenya Revenue Authority continues to record shortfalls in ordinary revenue, reporting Sh137 billion short of the December 2019 target.

“The shortfall was in all broad categories of ordinary revenues with income tax recording the highest shortfall on account of depressed performance in Pay as You Earn followed by excise tax and VAT,” the BPS reads.

Despite running out of time, a resilient Jubilee administration has unveiled what it believes would work the magic of attaining the legacy.

The government is banking on the creation of Special Economic Zones (SEZ) and Industrial Parks across the country to facilitate manufacturing.

In the next fiscal year, the government seeks to put more resources to the Dongo Kundu SEZ - set to create 60,000 jobs, and the Naivasha Industrial Park.

To bolster agriculture, the government is seeking to rehabilitate the Bura Irrigation Scheme to cover 15,000 acres from the current 6,000 acres.

This, together with the expansion of Lower Trans Nzoia and Mwea Irrigation schemes by 10,000 acres, is targeted to increase rice production.

The government plans to restructure the Kenya National Trading Corporation to better receive and manage farm produce.

“This will help reduce post-harvest losses and improve post-harvest handling of agricultural produce,” the BPS reads.

President Kenyatta’s administration says it achieved 39 per cent health coverage in the UHC pilot in Kisumu, Nyeri, Isiolo, and Machakos counties.

With the planned rollout in the remaining 43 counties, Jubilee seeks to address human resource needs, provide basic equipment, and ensure public hospitals’ pharmacies are stocked.

On housing, Jubilee says it would be paramount to forge partnerships with the private sector and development partners to attain the goal of half a million housing units.

The draft BPS 2020 projects that over 8,800 units would be achieved in a project by the United Nations Office for Project Services tagged Habitat Heights.

The government cites looks at a further 200,000 units at the Habitat Heights adding that it has obtained land for another 100,000 units.

To beat the high cost of land, the Treasury posits that the national and county governments will make their land available at no cost.

VAT exemptions on housing inputs, waiver of Nema and NCA charges, and operationalisation of the National Housing Development Fund, as well as the Mortgage Refinancing Scheme, are also in play.