The Senate Standing Committee on Finance and Budget has adopted its report on the Equalization Fund Appropriation Bill, 2025, and resolved to recommend that the Senate approve the Bill without amendments.
This move fulfills the constitutional requirement under Article 204(3), which mandates that all withdrawals from the Equalization Fund must be authorized through legislation. The Bill seeks to allocate Ksh 16.8 billion aimed at improving access to basic services in marginalized areas.
Funding Allocation Targets 1,424 Marginalized Areas
The funds will target 1,424 marginalized sub-locations across 34 counties, focusing on key sectors including water, roads, health facilities, and electricity.
The allocation consists of KSh 6.2 billion from the 2024/2025 financial year and KSh 10.6 billion for the 2025/2026 financial year.
The 2025/2026 allocation is based on 0.5 percent of the most recent audited and approved revenues for the 2020/2021 financial year, amounting to KSh 7.852 billion. This is further supplemented by KSh 2.747 billion to address outstanding arrears.
The Committee noted that, while the Bill includes allocations at the county and constituency levels, the monies are fully ring-fenced. They are especially allocated for sub-locations listed in the Commission on Revenue Allocation’s Second Marginalization Policy.
Arrears and Disbursement Delays Raise Concern
Addressing implementation issues, the Committee emphasized ongoing administrative and economic roadblocks that prevented the Fund’s effectiveness. It said that the total unpaid arrears, including the current allocation, had reached KSh 62.677 billion out of a constitutional right of KSh 79.858 billion.
Senators expressed concerns that just KSh 13.4 billion, or 22.4 percent of the entire entitlement, had been disbursed since the Fund’s creation. The Committee warned that continuous distribution delays might undermine the Fund’s goal of providing basic services to vulnerable areas.
Strict Controls Introduced to Safeguard Funds
To safeguard the allocated funds, the Bill introduces strict financial controls. Clause 5 stipulates that the funds will not be deposited into County Revenue Funds but instead into special purpose accounts opened at the Central Bank of Kenya by beneficiary counties.
Withdrawals will require authorization from the Controller of Budget, based on written instructions from the Secretary of the Equalization Fund Advisory Board through the National Treasury.
Additionally, KSh 504 million has been set aside to support the Secretariat and Board, capped at three percent of the annual allocation in line with Public Finance Management regulations.
If approved by the Senate and signed into law by the President, the Bill will authorize the release of the funds, paving the way for development projects in the targeted areas.
