Following the vote by Parliament to raise the debt ceiling to Sh10 trillion, economists at the Parliamentary Budget Office (PBO) have cautioned that the equitable share of money distributed to the counties by the national government is likely to decline. The Public Finance Management Regulations of 2015 were modified by Treasury CS Ukur Yatani’s legal notice No. 89, which received MP approval last month. This raised the debt ceiling from the Sh9 trillion set in place in 2019 to the current level.
Parliamentary Budget Office cautioned lawmakers in a document that raising the debt ceiling would have serious effects on the financial viability and security of the 47 county governments. A report on the medium-term debt management strategy that the National Assembly’s Budget and Appropriations Committee issued in March suggested that gross domestic funding should account for 75% of total financing and gross international financing should be 25%.
Mr. Yatani, who promoted the debt ceiling review, claimed that the country’s public debt, which stands at Sh8.6 trillion, made it impossible to finance the budget’s Sh846 billion deficit without having room to borrow from domestic or international markets. When the National Treasury presents the Budget Policy Statement and the Division of Revenue Bill to Parliament as required by the Public Finance Management, the counties are expected to experience the effects of the move by Parliament in the early part of the following year.
The national government raised Sh1.73 trillion in ordinary revenue during the 2019–20 financial year, according to the most current audited records that will determine how much money will be distributed to the counties. According to the Constitution, the National Assembly should accept the most current audited accounts of money received before determining the equitable portion of that revenue to be raised nationally and distributed to the national and county governments.
After the demands of the national government and after the national interests, the public debt is the second levy on Consolidated Fund Services. The interests of county governments come in at number four. This indicates that national interests, public debt, and needs of the national government, shall be considered before the counties in the Sh1.73 trillion revenue allocation.
According to the PFM Act, the National Treasury must distribute funds to county governments at the start of each quarter, but no later than the 15th day after the quarter’s start. County governments are threatening to shut down owing to a shortage of funding because the National Treasury has not cooperated with this requirement.
