Budget boss concerned over low absorption of funds by top three cities
Kenya’s top three largest cities – Nairobi, Mombasa, and Kisumu – are performing poorly in absorbing the allocated development budget, upending their improvement and expansion potential in the wake of devolution.
Devolution, kicking off in 2013, was seen as a lasting solution to poor resource distribution in Kenya, particularly development funds, which were traditionally abused as a political tool by the national government.
While there was no single county with a development budget absorption rate above 90 per cent by the end of June 2023, data from the Controller of Budget (CoB) shows that three counties reported a rate below 55 per cent.
Nairobi city had an absorption rate of 49.9 per cent, while that of Kisumu stood at 50.8 per cent. Mombasa, which burst its recurrent expenses while paying salaries and pending bills during the period, absorbed just 52.9 per cent of the development envelope.
This low rate, compounded with difficulties in generating own revenue, means the three devolved units are lagging in projects expected to enhance health facilities, sewer lines, and water and sanitisation programs.
The County governments spent only Sh98 billion on development activities, representing an overall absorption rate of 61 per cent of the annual development budget of Sh160.5 billion.
While addressing the Budget and Appropriations Committee, the CoB Margaret Nyakang’o noted there are challenges experienced during budget implementation at both National and County Government levels. She cited a decline in development expenditures, pending bills, late submission of financial reports by ministries and state agencies, and delays in releasing equitable shares by the National Treasury.
Other challenges are poor debt management, low performance in revenue collection, and delays in uploading budgets and annual procurement plans into prescribed financial systems.
“Some of the solutions to address these challenges include capacity building of county governments on planning, budgeting, and revenue forecasting; adherence to the disbursement schedule on equitable share transfers,” says CoB.
The devolved units had a combined budget amounting to Sh515.2 billion in the 2022/23 budget cycle. However, the approved budget of Kisumu, Mombasa, Nairobi, and some other 11 counties did not conform with the PFM Act, which requires recurrent expenses to use 70 per cent of the total budget as development takes the remaining 30 per cent. Majority of counties, led by Marsabit, Baringo, and Kwale, met this requirement by allocating at least 30 per cent to development activities, but only a handful managed implementation.
“Even though a number of County governments meet this requirement as far as the approved budget is concerned, in terms of actual expenditure, only seven County Governments meet this requirement,” CoB report to the treasury reads.
Meanwhile, the counties are still relying on the National exchequer owing to their below-target collection of own-source revenues (OSR), impacting their fiscal affairs that have seen them accumulate pending bills, delay salary payments, and service delivery.