Members of the National Assembly have approved Sh420 billion for county governments in the 2026/27 financial year under the Division of Revenue Bill 2026, setting the amount that will be transferred to devolved units from nationally collected revenue.
The figure marks a slight increase from the Sh415 billion allocated in the current financial year but remains far below the Sh534.96 billion that governors had proposed.
The decision establishes how the projected shareable revenue of Sh2.901 trillion will be split between the two levels of government. Under the approved framework, the national government will receive Sh2.472 trillion, while Sh9.6 billion has been reserved for the Equalisation Fund meant to support development in marginalised regions.
Lawmakers also endorsed an additional Sh5.6 billion as part payment of pending Equalisation Fund allocations. This pushes the total amount set aside for the fund in the upcoming financial year to Sh15.2 billion.
The National Assembly’s Budgets and Appropriations Committee explained that the limited rise in county funding was influenced by tight fiscal conditions facing the government. These include weaker than expected revenue performance, increasing debt repayment obligations, and the need to reduce the fiscal deficit to 5.3 per cent.
The committee pointed out that county governments had already felt the effects of revenue shortfalls earlier in the current financial year. In the first half of the 2025/26 financial year, transfers to counties fell short of the target by Sh33.2 billion due to underperformance in revenue collection.
Although the Commission on Revenue Allocation had proposed that counties receive Sh458.9 billion as their equitable share, lawmakers said the final figure had to take into account overall budget limitations. The committee noted that borrowing options remain constrained both locally and externally.
Samuel Atandi, Chair of the National Assembly’s Budget and Appropriations Committee, had sought clarification on how the Commission arrived at the proposed allocation.
“Being cognizant of the most important factors in the sharing of revenue between the National and County governments, how did you arrive at the proposed resource allocation to the County Governments?” Atandi posed.
In its response, the Commission on Revenue Allocation warned that the proposed distribution raised concerns about fairness in revenue sharing. It noted that while counties would receive only Sh5 billion more, the national government’s allocation would increase by about Sh152.5 billion.
The government expects ordinary revenue to grow by 5.7 per cent, translating to Sh157.5 billion. Meanwhile, total public spending, including net lending, is projected to reach Sh4.737 trillion in the 2026/27 financial year.
Governors have criticised the allocation, arguing that Sh420 billion will not be sufficient to sustain key services delivered by counties. They say the funds will struggle to cover salaries for workers transitioning under Universal Health Coverage, settle pending wage demands, and support other devolved responsibilities.