THE DIVISION OF REVENUE BILL, 2026
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Executive
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National Government Allocated KSh 2.47 Trillion
The National Government is allocated KSh 2,471,624,184,439 for the 2026/27 financial year.
- Public Debt Costs: Public debt-related redemption and interest costs are allocated KSh 1,542.1 billion, representing an increase of KSh 104.2 billion from the previous financial year.
- National Interest Expenditures: Expenditures of national interest (such as fertilizer subsidies, security operations, and the school examination fees subsidy) are allocated KSh 136.4 billion.
County Equitable Share Set at KSh 420 Billion
County Governments are allocated KSh 420,000,000,000, representing 20.5% of the FY 2022/23 audited and approved revenues of KSh 2,050,114,740,913.
- This allocation represents an increase of KSh 5.0 billion (1.2%) from the FY 2025/26 baseline of KSh 415.0 billion.
KSh 10.25 Billion Allocated to the Equalisation Fund
The Equalisation Fund receives a statutory allocation of KSh 10,250,573,705, which is 0.5% of the FY 2022/23 audited revenues.
- Arrears Payment: The National Treasury has provided an additional KSh 5.6 billion to go towards the settlement of arrears, bringing the total funds set aside for the Equalisation Fund to KSh 15.2 billion in FY 2026/27.
KSh 38.9 Billion Variance from CRA Recommendations
The National Treasury's allocation of KSh 420.0 billion differs from the Commission on Revenue Allocation's (CRA) recommended KSh 458.9 billion.
- Revenue Growth Differences: KSh 30.0 billion of the variance arises from differing revenue growth projections.
- Universal Health Coverage (UHC) Remuneration: The remaining KSh 8.94 billion difference arises because the CRA proposed including UHC worker remuneration in the equitable share, while the National Treasury proposes to allocate these funds separately through the County Governments Additional Allocations Bill, 2026.
Bill No.
Bill No. 2 of 2026
Gazette No.
Supplement No. 14 of 2026
Background
The Division of Revenue Bill, 2026 is prepared in accordance with Article 218(2) of the Constitution and Section 191(5) of the Public Finance Management Act (Cap. 412A). Its primary objective is to facilitate the vertical division of revenue raised nationally between the National Government and the 47 County Governments for the 2026/27 financial year.
Key Allocations
The Bill establishes the division of KSh 2,901,874,758,144 in shareable revenue as follows:
- National Government: KSh 2,471,624,184,439
- County Governments (Equitable Share): KSh 420,000,000,000
- Equalisation Fund: KSh 10,250,573,705
New Obligations and Funding Pressures
- Public Debt: Public debt costs are projected to consume KSh 1,542.1 billion in FY 2026/27, an increase from KSh 1,437.9 billion in FY 2025/26.
- Consolidated Fund Services (CFS): CFS expenditures, which include pensions and interest payments, account for 48.5% of ordinary revenue in FY 2025/26, up from 16.4% in FY 2013/14.
- Contingencies Fund: An allocation of KSh 2.0 billion has been provided to finance urgent and unforeseen expenditures under Article 208 of the Constitution.
Deviations from the Commission on Revenue Allocation (CRA)
The CRA recommended an equitable share of KSh 458.9 billion for counties, creating a KSh 38.9 billion variance from the Bill's proposed KSh 420.0 billion:
- Adjustment for Revenue Growth: While CRA recommended an increase of KSh 35.0 billion, the National Treasury proposed KSh 5.0 billion due to a KSh 115.3 billion revenue shortfall recorded by December 2025.
- UHC Workers Remuneration: The National Treasury excluded CRA's proposed KSh 8.94 billion for UHC staff from the equitable share, opting to fund the transition of UHC workers to permanent terms through the County Governments Additional Allocations Bill, 2026.
Transitional Provisions and the Fourth Basis Formula
Horizontal revenue allocation among counties for the 2026/27 financial year relies on the Fourth Basis formula, which comprises three elements:
- The Baseline Allocation Ratio: KSh 387.43 billion to ensure no county loses revenue compared to its FY 2024/25 allocation.
- The Affirmative Action Allocation: KSh 4.46 billion ring-fenced for 12 smaller counties.
- The Fourth Basis Indices: KSh 28.12 billion distributed based on population (45%), basic share index (35%), poverty index (12%), and geographical size (8%).
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