Governors warn of shutdown in counties over cash crunch

Governors have implored senators to intervene and push the National Treasury to release funds to counties to avert a looming shutdown.

Mombasa Governor Abdulswamad Nassir warned that several county governments would soon shut down if immediate measures were not taken.

“Several counties are facing a total shutdown. These depend on nothing except exchequer releases for their operations,” Nassir said.

Appearing before the Senate’s National Cohesion and Equal Opportunity Committee on Friday, painted the picture of a dire situation in the devolved units.

He said that most counties have not paid their workers for close to three months now and services disrupted essentially in health facilities which have run out of essential supplies.

The devolved units have not received a penny since the beginning of the 2024-25 financial year. They are supposed at least Sh100 billion for July, August and September.

The Treasury has yet to release the cash following the delays by Parliament to approve crucial Bills – including the Division of Revenue and County Allocation of Revenue Bills – to unlock the funds.

However, the governors want the Senate to prevail upon the Treasury to release funds for recurrent expenses on the strength of based of the Public Finance Management Act Regulations.

Section 134 of the Public Finance Management Act (Regulations), 2012 provides that if the County Allocation of Revenue Bill submitted to Parliament for a financial year has not been approved by Parliament..

… is not likely to be approved by Parliament, by the beginning of the financial year, the Controller of Budget may authorise withdrawals of up to 50 per cent from the Consolidated Fund based on the last County Allocation of Revenue Act approved by Parliament

“Mombasa has various versatile ways of collecting our source revenue, but there are many counties where there will soon be a total shutdown,” Nassir said.

The committee chairman Mohamed Chute asked the governors, through their umbrella body, the Council of Governors to directly engage the President to unlock the impasse.

“It is true, there is a big problem. I don’t know why you should hold meetings with the Treasury. Look for the President and engage him. Otherwise, soon there will be a total shutdown,” Chute said.

In July, President William Ruto rejected the County Allocation of Revenue Bill, 2024 following the withdrawal of the Finance Bill, 2024.

Appearing before the Senate’s Finance and Budget Committee last week, Treasury CS John Mbadi said that the Treasury was seeking the opinion of the Attorney General before releasing the funds.

On Thursday, Mbadi met CoG Vice Chair Governor Ahmed Abdullahi and Nairobi Governor Johnson Sakaja to address the cash crisis.

“This has been a difficult period for us, but we are hopeful following the discussions that counties will soon see funds flowing again,” Abdullahi said after the meeting.

The revenue deadlock had left the 47 counties without critical disbursements from the national government, severely impacting essential services and development projects.

In response, many counties were forced to rely on creative solutions, with some governors borrowing or slashing non-essential services to stay afloat.

Health services were among the hardest hit, with public hospitals facing supply shortages and staff payment delays.

In some counties, school feeding programmes, essential for keeping children in school in marginalised areas, also faced disruptions.

The Treasury CS confirmed that the meeting had indeed borne results, and counties should anticipate the release of funds soon.

"The meeting was fruitful, and counties should expect the resumption of exchequer release," Mbadi said.

The governors expressed concerns during the Council of Governors (COG) meeting with President William Ruto at the State House on Universal Health Coverage (UHC).

President Ruto asked that a small team work with the Treasury to explore possible solutions.