Governors across Kenya have raised alarm over an imminent shutdown of county operations due to a severe cash crunch, with the devolved units not having received any funds from the National Treasury since the beginning of the 2024/25 financial year. Mombasa Governor Abdulswamad Nassir voiced the concerns during a meeting with the Senate’s National Cohesion and Equal Opportunity Committee, urging senators to intervene and expedite the release of funds.
“Several counties are facing a total shutdown. These depend on nothing except exchequer releases for their operations,” Governor Nassir warned, highlighting the dire financial situation many counties face. He painted a picture of crippled service delivery, especially in critical areas such as health, where hospitals have run out of essential supplies and workers have gone unpaid for nearly three months.
The Financial Deadlock
The root of the financial crisis stems from delays in passing key legislation, such as the Division of Revenue and County Allocation of Revenue Bills. These Bills are crucial to unlocking the necessary funds for counties. As a result, counties are yet to receive the over KSh100 billion that was supposed to cover their operations for the months of July, August, and September.
Without these funds, counties are grappling with severe disruptions in public services. Health facilities, in particular, have been hardest hit, with shortages in medical supplies and staff facing significant payment delays. Moreover, vital services such as school feeding programs, which provide essential nutrition to children in marginalized areas, have also been interrupted in some counties, adding to the growing public concern.
Push for Immediate Intervention
The governors are pushing for a resolution to this fiscal impasse. They have urged senators to pressure the National Treasury to release funds under the provisions of the Public Finance Management Act Regulations. Section 134 of the Public Finance Management Act (Regulations) 2012 provides that in the absence of an approved County Allocation of Revenue Bill, the Controller of Budget can authorize withdrawals of up to 50% from the Consolidated Fund based on the previous year’s allocation.
Despite having some ability to raise local revenue, Nassir pointed out that many counties are fully reliant on exchequer releases to sustain operations. “Mombasa has various versatile ways of collecting our source revenue, but there are many counties where there will soon be a total shutdown,” he added, emphasizing that some counties may not survive without immediate intervention.
Senate National Cohesion Committee Chairperson Mohamed Chute echoed these concerns, advising the governors to escalate the matter directly to President William Ruto to unlock the cash flow deadlock. “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 advised.
Treasury Seeks Legal Opinion
Part of the complication lies with the Treasury’s cautious approach to releasing the funds. Treasury Cabinet Secretary John Mbadi, in an appearance before the Senate’s Finance and Budget Committee, explained that the Treasury was awaiting the Attorney General’s legal opinion on the matter. He further met with Council of Governors Vice-Chair Ahmed Abdullahi and Nairobi Governor Johnson Sakaja to discuss the financial crisis. The meeting, while tense, ended on a hopeful note, with Mbadi reassuring that the Treasury was working towards resuming the exchequer releases.
“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.
President Ruto’s Involvement
Amid growing pressure from the counties, President William Ruto held a meeting with the Council of Governors (CoG) to discuss the challenges. During this State House meeting, which primarily focused on Universal Health Coverage (UHC), the president acknowledged the severity of the cash crisis. He instructed a small team to work closely with the Treasury to find viable solutions to the financial standoff.
While no firm timeline for the release of funds has been provided, Treasury CS Mbadi has reassured that the meeting bore positive results, and counties should soon expect funds to be disbursed. “The meeting was fruitful, and counties should expect the resumption of exchequer release,” he confirmed.
Impacts of the Cash Crunch
The prolonged financial uncertainty has strained counties’ ability to function effectively. In response, many counties have resorted to borrowing or cutting non-essential services to stay afloat. Health services remain the most vulnerable sector, but disruptions in other areas like education and infrastructure development are also being felt across the country.
The next few weeks will be crucial as county leaders continue to push for immediate disbursements while the Treasury works through the legislative and legal hurdles to release the much-needed funds.
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