The national and the county governments were yesterday staring at a serious cash crunch after the National Treasury declared a Sh67 billion deficit occasioned by low revenue collection.
National Treasury Principal Secretary Dr Chris Kiptoo in a meeting with senators, explained that the government currently owes State agencies Sh204 billion while the counties are demanding Sh92.5 billion which is the equitable share for January, February and March.
While appearing before the Senate Public Investments Committee chaired by Vihiga Senator Godfrey Osotsi, Kiptoo was categorical that the delayed disbursements by the exchequer have been occasioned by a shortfall in revenue collection.
“The position is that there is delay in exchequer releases because of the revenue performance of our target of about Sh67 billion as of Wednesday. We are not sitting pretty, we are working round the clock to see if there is a possibility that come April and May we will be in a better position,” said Kiptoo.
The Ministries, Departments and Agencies (MDASs) are awaiting payment of recurrent expenditures amounting to Sh96.5 billion, development funds amounting to Sh55 billion and pensions totaling Sh53 billion.
“We do not occasion delay deliberately. It is just that the cash position cannot allow us to settle quickly. We will have informal forum with governors and senators to see how to improve on all these,” he said.
Financial position
The National Treasury CS pointed out that due to the country’s financial position, they have put in place mechanisms to turn around the situation through enhancing tax compliances and netting more money from donors to secure additional funds.
The government is expecting funds from the World Bank through development policy operation and a programme with the International Monetary Fund through resilience sustainability facility.
“If we can have greater conservation around expanding the cake rather than sharing the cake. When we share the cake and it is small, then it is a problem but if we have conversation about expanding our economy, I don’t think we will have a problem at all paying,” said Kiptoo.
Operations in a number of counties have been paralysed following delays in disbursement of equitable share to county governments for the current financial year.
According to Kiptoo, the government has prioritized to offset the current debt owed to different domestic and foreign institutions, dispelling claims by the Council of Governors (CoG) that the exchequer had prioritized the financial demands of the national government at the expense of the counties.
“There are things which come first, like we must first pay our debts and we don’t want to hear that Kenya failed to pay its debt. In the month of March, we have spent over Sh150 billion in paying debt and it is the biggest component of our revenue,” said Kiptoo.
Revenue shortfall
CoG Finance Committee chair and Kakamega governor Fernandes Barasa however questioned the delays despite the exchequer insisting that the government has been facing a revenue shortfall.
“When will the government address the issue of the pending payments because we can’t resolve the issues facing counties in terms of stalled projects if we haven’t sorted out the pending payments. Our issue is not with the conditional grant but the equitable share,” Barasa stated.
Kisii governor Simba Arati who sits in the CoG Finance Committee lamented the delays in disbursement have led to the stalling of key development projects within the counties as the monies disbursed have been used on recurrent expenditures.
“We have received for December and we have to pay salaries first. I have never paid for any work done, any money I am getting I have to pay salaries. The big problem is in Treasury, as long as they delay funds, there will be no development,” said Arati.
Slow cash release
Out of the estimated allocation of Sh200 billion disbursed to counties every financial year to finance development projects, the National Treasury revealed that it has so far released a paltry Sh88 billion due to financial constraints.
“From July to now, ministries have not received development budget, so it is not like the government has favored ministries against the counties. That is not the position,” the Treasury PS explained.
Although he remained non-committal on when counties will receive their allocation, he was positive that the country’s financial inflow will improve in a few months.
“This is a month we expect to get more revenue and when we get revenue, I assure you we will pay on time. If our situation improves we want to have a situation that if it delays its only for one month,” Kiptoo said.
