The Division of Revenue Bill, 2025
Status Timeline
Proposed
Active now
Public Review
Pending
Debate
Pending
Executive
Pending
Final
Pending
KSh 405.1 Billion Allocated as County Equitable Share
County governments are allocated an equitable share of KSh 405,069,420,197 for the 2025/26 financial year. This represents 25.79% of the KSh 1,570,562,945,014 audited and approved revenue for the 2020/21 financial year, reflecting an increase of KSh 17.6 billion from the FY 2024/25 allocation of KSh 387.4 billion.
National Government to Absorb Revenue Shortfalls
Under Clause 5(1), if the actual revenue raised nationally falls short of the expected revenue set out in the Schedule, the entire shortfall must be borne by the National Government, ensuring counties receive their full budgeted allocations.
Excess Revenue Earmarked for National Debt Reduction
Clause 5(2) dictates that if the actual revenue collected exceeds projections, the excess will accrue to the National Government. These funds may only be utilized to reduce national borrowing or pay off outstanding public debts.
KSh 10.59 Billion Set Aside for the Equalization Fund
The Bill allocates KSh 10,589,554,076 to the Equalization Fund. This amount includes KSh 7,852,814,725 representing 0.5% of shareable revenue and KSh 2,736,739,351 designated to cover outstanding arrears.
Bill No.
No. 10 of 2025
Gazette No.
Supplement No. 38 of 2025
Sponsor
Gladys Boss
Background
The Division of Revenue Bill, 2025 is introduced pursuant to Article 218 of the Constitution of Kenya and Section 191 of the Public Finance Management Act (Cap. 412A). It facilitates the vertical division of nationally raised revenue between the National Government and the 47 County Governments for the 2025/26 financial year.
Key Amendments
The Bill proposes a vertical allocation of a total shareable revenue of KSh 2,835,040,979,609 as follows:
- National Government: KSh 2,419,382,005,336
- County Governments (Equitable Share): KSh 405,069,420,197 (representing 25.79% of the audited and approved revenue for FY 2020/21)
- Equalization Fund: KSh 10,589,554,076 (including KSh 7.85 billion current allocation and KSh 2.74 billion in arrears)
New Obligations
- Shortfall Absorption: Under Clause 5(1), any shortfalls in the actual revenue raised nationally during the financial year must be borne entirely by the National Government.
- Surplus Management: Under Clause 5(2), if actual revenue collections exceed the projected amounts, the excess revenues will accrue to the National Government to be used exclusively to reduce borrowing or pay off existing public debts.
- Formula Compliance: The allocation to counties is based on the horizontal distribution formula (Third Basis) approved by Parliament, which considers factors such as population (18%), health index (10%), agriculture index (10%), urban index (5%), poverty index (14%), land area (8%), roads (8%), and basic share (20%).
Deviations from CRA Recommendations
The Commission on Revenue Allocation (CRA) recommended an allocation of KSh 417.4 billion to County Governments based on a proposed fourth basis formula. The National Treasury instead proposed KSh 405.1 billion, resulting in a variance of KSh 12.366 billion. This lower allocation is informed by:
- Elevated national expenditures for public debt servicing (projected at KSh 1.606 trillion for FY 2025/26)
- A fiscal consolidation plan targeting a reduction in the fiscal deficit to 4.3% of GDP
- Geopolitical shocks and financing constraints in domestic and international markets
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Updates will be visible here once they are approved and applied to this bill.