National Treasury plans to reduce counties budget by 0.4 percent the next financial year.
This will see counties experience hard time struggling with the constrained budget.
The proposals are contained in a detailed draft 2018 Budget Review and outlook paper.
The move is being fronted as one way of curbing overspending of public funds.
The reduction in the amount of money transferred to the county governments will be the first in six years, given the State has been increasing allocations to the devolved units every year since the advent of devolution.
“The National Government expenditures funded from domestic resources are projected to decline by 1.2 per cent of GDP,” says Treasury Cabinet Secretary Henry Rotich in the paper, which is a crucial document linking policy, planning and budgeting.
In the 2017-2018 financial year, counties received a total of Sh341 billion, where equitable share from national government revenue was Sh302 billion while other funds were conditional allocation.
The cash crunch in the country has also been attributed to the taxman’s continued inability to meet revenue collection targets, leading to a huge deficit of more than Sh600 billion to finance the multi-trillion shilling budget.
“As the preparations for the 2019-2020 financial year Medium Term budget commence, it is worth noting that the economy is on recovery after experiencing challenges with revenue collection caused by prolonged electioneering period and drought with elevated expenditure pressures in 2017-2018,” explains the CS.