THE DIVISION OF REVENUE BILL, 2025
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KSh 405.1 Billion Allocated to County Governments
Under the Schedule to the Bill, county governments receive an equitable share of KSh 405,069,420,197. This represents 25.79% of the KSh 1,570,562,945,014 audited and approved revenue for the 2020/21 financial year, marking a KSh 17.6 billion increase from the previous financial year's allocation of KSh 387.4 billion.
National Government to Absorb All Revenue Shortfalls
Pursuant to Clause 5(1), if the actual revenue raised nationally falls short of the projected targets, the National Government must bear the entire shortfall. Under Clause 5(2), any excess revenue collected will accrue to the National Government to pay off public debts or reduce national borrowing.
KSh 10.59 Billion Allocated to the Equalization Fund
The Bill sets aside KSh 10,589,554,076 for the Equalization Fund. This total consists of KSh 7,852,814,725 (representing 0.5% of the audited and approved revenue of KSh 1,570,562,945,014) and KSh 2,736,739,351 earmarked to address outstanding fund arrears.
National Government Receives KSh 2.42 Trillion
The National Government is allocated KSh 2,419,382,005,336. This portion accommodates critical national interests and obligations, including KSh 1,340,588,000,000 for public debt redemption and interest payments, and KSh 738,456,000,000 for other statutory and constitutional obligations.
Bill No.
Bill No. 10 of 2025
Gazette No.
Supplement No. 38 of 2025
Background
The Division of Revenue Bill (DoRB), 2025 is prepared in fulfilment of the requirements of Article 218(2) of the Constitution and Section 191(5) of the Public Finance Management Act (Cap. 412A). Its principal objective is to facilitate the equitable division of revenue raised nationally between the national and county levels of government for the 2025/26 financial year. The allocations are informed by macroeconomic factors including a target fiscal deficit of 4.3% of GDP, increased expenditures for National Government debt servicing due to a weakened shilling, and constraints in accessing domestic and international financial markets.
Key Provisions
- Shareable Revenue Allocation (Clause 4): Revenue raised nationally for the 2025/26 financial year is divided as specified in the Schedule to the Bill.
- Shortfall Absorption (Clause 5(1)): If actual revenues raised nationally fall below the projected targets, the National Government must absorb the entire shortfall. County government allocations remain protected.
- Excess Revenue (Clause 5(2)): Any revenue collected in excess of the projected targets will accrue solely to the National Government and may be used to reduce borrowing or repay public debts.
National and County Allocations
The Bill details the vertical allocation of KSh 2,835,040,979,609 in total sharable revenue as follows:
- National Government: Allocated KSh 2,419,382,005,336.
- County Equitable Share: Allocated KSh 405,069,420,197, representing 25.79% of the last audited and approved revenue (KSh 1,570,562,945,014 for FY 2020/21). This reflects an increase of KSh 17.6 billion compared to the FY 2024/25 allocation of KSh 387.425 billion.
- Equalization Fund: Allocated KSh 10,589,554,076. This comprises a statutory allocation of KSh 7,852,814,725 (0.5% of audited revenue) and KSh 2,736,739,351 in arrears.
Deviations from CRA Recommendations
The Commission on Revenue Allocation (CRA) recommended a county equitable share of KSh 417.425 billion (an increase of KSh 30 billion over the previous year). The National Treasury proposed KSh 405.069 billion (an increase of KSh 17.644 billion). This results in a variance of KSh 12.366 billion.
- Treasury's Position: Based on assumptions including a projected ordinary revenue of KSh 2.835 trillion, stable interest and exchange rates, inflation within the 5±2.5% target, and a steady GDP growth momentum of 5.3% in 2025.
- CRA's Position: Formulated around the need to ensure counties have adequate resources for assigned functions, counterpart funding for shared commitments, and compliance with statutory obligations such as the Housing Levy and Universal Health Coverage.
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