Counties are sinking deeper into debt as the National Treasury fails, for a second year in a row, to disburse billions in time for the start of the new financial year. Over Sh62 billion owed to county governments for May and June remains unpaid, raising fears of stalled services, pending bills, and a looming shutdown of operations.

Controller of Budget Margaret Nyakang’o confirmed the delayed payments, saying counties should not expect the June disbursements before the current financial year ends.

“Treasury says they could release the May funds in the last week of the financial year. But they are categorical that June disbursements will be done in the next financial year,” she said.

The missed payments come on the back of last year’s delays, when counties were left waiting for Sh30 billion that was only released after the close of the financial year.

The pattern of late disbursements has become a growing concern, with billions released too late to be properly used, derailing development and essential services.

The Council of Governors has warned of dire consequences if the funds are not released immediately.

“We demand that the National Treasury immediately release the funds owed to counties, failing which, county governments will have no choice but to shut down operations completely,” said Chairperson Ahmed Abdullahi.

A recent report by Nyakang’o revealed how counties are being forced into borrowing to stay afloat, with short-term loans attracting heavy interest and charges. As of March, counties had taken loans amounting to over Sh20 billion, though the actual figure may be higher since not all counties disclosed their debt status.

The cash crisis has left counties unable to meet basic obligations like paying staff, supporting health services, and completing stalled infrastructure projects.

Although counties are legally entitled to a monthly share of national revenue, the Treasury has repeatedly missed the legal deadline of the 15th of each month, set out in the Public Finance Management Act.

Critics say the Treasury continues to prioritise national government spending over counties, despite the central role counties play in delivering services under devolution. With just days to go before the 2024–25 financial year begins, there is growing pressure on the Treasury to fix its disbursement system and honour its obligations.

Analysts warn that unless reforms are made to ensure predictable and timely funding, counties will continue to operate in crisis mode, undermining the goals of devolved governance.