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County governments on the spot for violating law on 30 percent development budget

Because of non-compliance, the National Treasury now wants them to adhere to this fiscal responsibility principle both at the budget approval stage and during the actual implementation of the budget.

County governments continue to allocate low budgets for development expenditure compared to their recurrent budgets despite assurances made by most governors that they will adhere to the requirement to allocate at least 30 per cent to implementation of projects.

According to the Draft 2025 Budget Policy Statement, in the 2023/24 financial year, about 33.6 per cent was approved for the development budget but the actual budget expenditure was 24.4 per cent. Comparatively, the amount was low compared to the approved budget for recurrent expenditure, which was 66.2 per cent, but was further increased to 75.6 per cent.

This happened as most counties got concerned with their capacity to deliver essential services within the confines of the allocated budgets, taking into consideration Kenya’s prevailing challenges such as inflation, the escalating cost of living, and the unique requirements of specific regions.

Section 107 (2) (b) of the Public Finance Management Act (PFMA) 2012 provides that county governments should allocate a minimum of 30 percent of their budget for development expenditures over the medium term.

However, because of the non-compliance, the national government is now asking county governments to adhere to this fiscal responsibility principle both at the budget approval stage and during the actual implementation of the budget.

The county governments have also been cautioned to adhere to regulation 25(1)(a) and (b) of the PFM (County Governments) Regulations 2015 which provides that county governments’ expenditure on wages and benefits for public officers shall not exceed 35 per cent of the county government’s total revenue.

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According to the National Treasury, compliance with this fiscal rule has been insufficient, highlighting the necessity for a concerted effort to ensure that the wage bill remains within the legally established threshold.

Further regulation 25(1)(d) of the PFM provides that the county public debt shall not exceed 20 per cent of the total revenue of the County Government at any given time. Any county government seeking to borrow must comply with this legal requirement.

On taxes, the National Treasury advised county governments to consider the principles of public finance management and taxation when levying taxes and fees. It urges the governments to prioritize the establishment of adequate legal frameworks regarding the principal legislation governing the imposition of taxes and fees is essential to ensure that these actions are conducted in accordance with the law.

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