The Commission of Revenue Allocation (CRA) has sounded a warning over the rate of borrowing by the national government to meet its fiscal deficit each financial year.
According to CRA Chairperson Kiring’ang’ai, the current debt trajectory is not sustainable, even as it dealt devolved units a huge blow to retain equitable revenue allocation to counties at Ksh.370 billion citing ballooning national debt and effects of coronavirus pandemic on the economy.
Council of Governor (CoG) had pushed for an additional Ksh.11.5 billion on top of the current allocation of Ksh.370 billion, saying the projected revenue of Ksh.2.1 trillion for the year 2022/2023 cannot allow for more resources to counties and servicing of the national debt.
The commission has allocated the national government Ksh.1, 765.2 billion and the Equalization Fund of Ksh.6.8 billion.
“At this time should we borrow more or should we tax more to raise the additional Ksh.381 billion? After all deductions including interests, we have remained with Ksh.1 trillion which we are supposed to run the rest of government,” said Kiringai.
A few weeks ago, the CoG had pushed for an additional allocation of Ksh.381.45 billion to counties or optimal implementation of devolved functions.
“To safeguard devolution and ensure optimal implementation of the devolved functions by the county governments, the council proposes additional funding of Ksh.381.45 billion,” said CoG Chairman Martin Wambora.
According to Wambora, their proposal was backed by the Constitution of Kenya (Amendment) Bill, 2020 commonly known as the Building Bridges Initiative (BBI) Bill that was nullified by the Court of Appeal.
The Bill proposes an allocation of 35 percent of the total revenue by the Kenya Revenue Authority (KRA).
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The bill was, however, squashed by the High Court and the Court of Appeal terming it illegal and unconstitutional, and is currently pending in the Supreme Court after an appeal was filed by Attorney General Paul Kariuki.
The revenue commission in its argument to retain the allocation at Ksh.370 billion in 2021-22 being the 2022 general election, much of when all counties will be transitioning under new management.
The commission has further recommended that each level of government should restructure their expenditures given the slump in the stimulation of the economy occasioned by the coronavirus pandemic and the upcoming general elections.
“Though Kenya’s economy is expected to recover and grow at 5.6 percent in 2021, this growth is likely to be dampened by the general elections in 2022. Historical evidence shows that periods of general elections are characterized by reduced economic activity as investors hold back awaiting the outcome of the election,” Kiringai said.
The report by the revenue allocation commission also raised alarm on the huge public debt that has been on a steady rise from the fiscal year 2009/2010 which stood at 41.4 percent to 69.1 percent in 2021/2022.
