Treasury to guarantee county borrowing should revenue collection drop

Counties can now breathe a sigh of relief following the signing of the equitable division of revenue bill between the national and county governments.

The act of parliament providing for the equitable division of revenue raised between the national and county governments will in future assure county governments of the disbursement of their share of national cake irrespective of whether the national government meets its revenue collection target.

To meet this, the government through the National Treasury will from the 2018/2019 fiscal year allow county governments to access overdrafts, grants and loans should revenue collection drop affecting the disbursement of funds to the counties.

“If the actual revenue raised nationally in the financial year falls short of the expected revenue set out in the schedule, the shortfall shall be borne by the national government, to the extent of the threshold prescribed in regulations by the Cabinet Secretary,” reads part of the act.

In the bill signed by President Uhuru Kenyatta, counties will receive a total of Sh372.7 billion in the 2018/19 financial year where the kitty will be comprised of Sh314 billion as the equitable revenue share while a further Sh4.7 billion will be used in the equalization fund.

The window created by government through the new revenue act will put to bed the constant wrangles between national and county governments by covering cash shortfalls in revenue disbursement which has put the two levels of government at loggerheads.

County governments have consistently faulted the national government over their failure to avail the necessary funds which has in turn resulted in the delay of funding to county infrastructural projects and operations, service delivery and in some cases, the remuneration of county civil servants.

The national government through its revenue collection body, the Kenya Revenue Authority (KRA), has been under pressure to raise revenue collection.

Should there arise a scenario where revenue is collected in excess, the equitable division of revenue act has given the national government the green light to use the extra funds to service debt if it so chooses.

“If the actual revenue raised nationally in the financial year exceeds the projected revenues set out in the schedule, the excess revenue shall accrue to the national government, and may be used to reduce borrowing or pay debts,” the act reads.