The Division of Revenue Bill, 2026 (National Assembly Bills No. 2 of 2026) The Division of Revenue Bill, 2026 (National Assembly Bills No. 2 of 2026)

<!-- image --> ## REPUBLICOFKENYA ## PARLIAMENT NATIONAL ASSEMBLY BILLS (Bill No. 2 of 2026) ## THE DIVISION OF REVENUE BILL, 2026 (A Bill published in the Kenya Gazette Supplement No. 14 of 2026 and passed by the National Assembly, with amendments, on 10h March, 2026) N.A./B/No.2/2026 <!-- image --> ## THEDIVISION OF REVENUEBILL,2026 ## ARRANGEMENTOFCLAUSES ## Clause ## PARTI-PRELIMINARY - 1--Short title. - 2--Interpretation. - 3.-Object and purpose of the Act. - 4—Allocations to National Government and County Governments. ## SCHEDULE Equitable Share of Revenue Raised Nationally between the National and County Governments for the 2026/27 Financial Year. ## APPENDIX Explanatory Memorandum to the Division of Revenue Bill, 2026 ## THE DIVISION OF REVENUE,BILL 2026 ## A Bill for - AN ACT of Parliament to provide for the equitable Division of Revenue raised nationally between the National and County governments in the 2026/27 financial year, and for connected purposes ENACTED by the Parliament of Kenya, as follows--- 1. This Act may be cited as the Division of Revenue Act, 2026. 2. In this Act, unless the context otherwise requires--- "Cabinet Secretary" means the Cabinet Secretary for the time being responsible for matters relating to finance; and "revenue" has the meaning assigned to it under section 2 of the Commission on Revenue Allocation Act, Cap.428. 3. The object and purpose of this Act is to provide for the equitable sharing of revenue raised by the national government among the national and county levels of government in the 2026/27 financial year in accordance with Article 202(1) and 203(2) of the Constitution. 4. Revenue raised nationally in respect of the 2026/27 financial year shall be shared equitably among the national and county govermments as set out in the Schedule to this Act. Short title. Interpretation. Cap.428. Object and purposeofthe Act. Allocationsto national govemmentand county govermments, ## SCHEDULE (s.4) ## Allocation of Revenue Raised Nationally Between the National Government and County Governments for the Financial Year 2026/27. | Type/level of allocation | Type/level of allocation | Amount in Kshs. | Percentage (%) of FY 2022/23 audited and approved Revenue i.e. Kshs. 2,050,114,740,913 | |----------------------------|----------------------------|-------------------|------------------------------------------------------------------------------------------| | | A.Total Shareable Revenue | 2,901,874,758,144 | | | | National Government | 2,471,624,184,439 | | | C. | Equalisation Fund | 10,250,573,705 | 0.50% | | D. | County equitable share | 420,000,000,000 | 20.5% | ## APPENDIX ## EXPLANATORY MEMORANDUM TO THE DIVISION OF REVENUE BILL, 2026 ## Background 1. This memorandum has been prepared as an attachment to the Division of Revenue Bill (DoRB), 2026 in fulfilment of the requirements of Article 218(2) of the'Constitution and section 191 (5) of the Public Finance Management Act, Cap. 412A. 2. Article 218 (2) of the Constitution requires that the Bill be submitted to Parliament every year together with a memorandum explaining: 3. (a) the proposed revenue allocation set out in the Bill; 4. (b) the extent to which the Bill has taken into account the provisions of Article 203 (1) of the Constitution; and 5. (c)asummary ofanys significant deviation from the recommendations of the Commission on Revenue Allocation (CRA), with an explanation for each such deviation. 3. Section 191 (5) of the Public Finance Management Act, CAP 412A requires that the Bill be accompanied by a memorandum which explains: 7. 203(1) of the Constitution; 8. (b) the extent of the deviation from the Commission on Revenue Allocation's recommendations; 9. () the extent, if any, of deviation from the recommendations of the Intergovernmental Budget and Economic Council; and 10. (d) any assumptions and formulae used in arriving at the respective shares mentioned in subsections 191 (2) and (3) of the Public Finance Management Act, CAP 412A. ## Explanation of the Allocations to the National and County Governments as Proposed in the Bill 4. The Bill proposes an allocation of Kshs. 2,471.6 billion to the National Government and Kshs. 420.0 billion to county governments for the financial year 2026/27 as equitable share of revenue raised nationally. The allocation of Kshs. 420.0 billion translates to an increase of Kshs. 5.0 billion or 1.2 % from a base of Kshs. 415.0 billion allocated in the financial year 2025/26 (see Table 1). 5. Further, the Bill proposes to allocate Kshs. 10.2 billion to the Equalisation Fund in FY 2026/27, which is 0.5 % of Kshs. 2,050.1 billion, being the latest audited revenues raised nationally for FY 2022/23, as approved by the National Assembly. Table 1: Equitable Revenue Share Allocation to County Governments forFinancialYear 2026/27 | BUDGET ITEM | Amount (Kshs.million) | |-----------------------------------------------------------|-------------------------| | 1. Baseline (i.e., allocation in the previous FY 2025/26) | 415,000 | | Add: | | | .AdjustmentforRevenueGrowth | 5,000 | | Equitable Revenue Share allocation forFY 2026/27 (1+2) | 420,000 | Source:NationalTreasury 6. The proposed allocation of Kshs. 420.0 billion to county governments equitable revenue share is informed by the following factors:- 2. (a) Performance of FY 2025/26 Revenues: As at the end of December 2025, ordinary revenues for FY 2025/26 recorded a shortfall of Kshs 115.3 billion from the target. If this trend continues, it is bound to affect the projected ordinary revenue for FY 2026/27; 3. (b) Over the years, the National Government has continued to solely bear shortfalls in revenue in any given financial year except for FY 2024/25; 4. (c) The macroeconomic assumptions outlined in the 2026 Budget Policy Statement (BPS), including anticipated growth rates, inflation, and other economic performance indicators, which influence the resources available for allocation; 5. that revenue collection is not keeping pace with economic growth. Ordinary revenue as a share of GDP has declined from a high of 18.1% in FY 2013/14 to 14.1% in FY 2024/25 Budget and is projected at 14.4 % in FY 2025/26; - (e) Consolidated Fund Services (CFS) is accounting for 48.5% of ordinary revenue in the FY 2025/26, up from 16.4% in FY 2013/14, pensions and interest payments tripling their share of revenues to 8.7% and 39.8% from FY 2013/14 to FY 2025/26. This trend is expected to remain constant in FY 2026/27; - (f) The spending allocation for FY 2026/27 and medium-term is guided by the Government's fiscal consolidation plan intended to reduce annual uptake of debt and thereby reduce debt vulnerabilities and improvedebtsustainability.' The implementation of the fiscal consolidation plan by the Government which is aimed at reducing the fiscal deficit inclusive of grants from 5.9 percent of GDP in FY 2024/25 to 5.3 nn core expenditures while improving efficiency in implementation of development projects to contain expenditure growth, and stabilize debt; - (g) Increased expenditures for National Government for purposes of debt servicing; - (h) The proposed Equitable Share for financial year 2026/27 of Kshs 420 billion is equivalent to 20.5 percent of the most recent audited and approved actual revenues raised nationally of Kshs 2,050.1 billion for financial year 2022/23, pursuant to Article 203 (2) and (3) of the Constitution. ## Evaluation of the Bill against Article 203 (1) of the Constitution 7. Article 218(2)(b) of the Constitution requires that the division of revenue between the two levels of government and among county governments takes into consideration the criteria set out in Article 203(1)of the Constitution.The criteria include the following: national interest, public debt and other national obligations, the needs of the disadvantaged groups and areas, among others. 2. Table 2 provides an assessment of the extent to which this Bill has taken into consideration the requirements of Article 203(1) of the Constitution in determining the division of revenue between the national and county levels of Government in the financial year 2026/27. Table 2: Evaluation of the Bill against Article 203 (1) of the Constitution | | ITEMDESCRIPTION (Kshs. millions) | FY 2021/22 | FY 2022/23 | FY 2023/24 | 2024/25 | FY 2025/26 | FY 2026/27** | |----|------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------| | | ORDINARY (EXCLUDINGAIA) | REVENUE1,775,624 | 2,141,584 | 2,565,959 | 2,631,418 | 2,754,709 | 2,901,875 | | A | National Interest [Article 203 (1)(a)] | 83,197 | 61,423 | 97,853 | 92,455 | 125,380 | 136,430 | | A | Enhancement of security operations (police vehicles, helicopters,defenceelc.) | 22,261 | 24,299 | 23,969 | 33,044 | 49,315 | 53,512 | | A | Nationalirrigation&ferilizer clearance | 11,199 | 16,800 | 24,654 | 17,943 | 15,548 | 17,971 | | A | Youthempoverment | 14,548 | 15,290 | 13,087 | 10,290 | 15,004 | 15,016 | | A | National social safetynet-(for olderpersons,OVC,childwelfare, presidential bursary, severe disabiliry,HungerSaferyNet) | 29,286 | 31.074 | 31,120 | 29,178 | 39,614 | 40,031 | | A | School examination fees(KSCE& KCPE& Grade 6 (CBC Examination) | 4,103 | 5,003 | 5,023.47 | 2,000 | 5,900 | 9,900 | | B | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | Public debt(Art.203[1][b]) 1,174,013 930,354 1,187,784 1,340,588 1,437,879 1,542,069 | | C | Other National obligations (Article.203[1][b]) | 557,863 | 595,269 | 691,149 | 738,456 | 811,376 | 876,111 | | C | Pensions,constitutionalsalaries& other | 136,978 | 145,951 | 211,019 | 227,357 | 239,635 | 247,049 | | C | Constitutional commissions (Art. 248(2)) i.e., CRA, SRC,NLC, NPSC,IEBC,TSC | 299,333 | 321,968 | 332,497 | 355,313 | 402,386 | 453,967 | | C | Independent offices(Ar.248(3))- i.e.,AG and CoB | 6,499 | 6,981 | 8,756 | 8,808 | 9,523 | 9,690 | | C | Parliamen! | 37,883 | 38,477 | 41,002 | 40,865 | 47,991 | 48,779 | | C | Other constitutional institutions- StateLawOfficeandDPP | 8,371 | 8,713 | 10,054 | 9,414 | 10,889 | 12,983 | | C | Other siautory bodies (e.g., EACC,RPP,WPA,CAJ,IPOA, NGEC) | 7,036 | 8,462 | 9,002 | 8,911 | 10,375 | 10,904 | | C | Judiciary | 17,918 | 18,297 | 22,287 | 22,505 | 27,780 | 29,942 | | C | Other statutory allocations/earmarked funds (e.g.. NG-CDF,Affirmative Action) | 43,845 | 46,420 | 56,532 | 65,283 | 62,798 | 62,798 | | D | Emergencies[Art.203(1)(k)] | 5,000 | 5,000 | 1,200 | 4,000 | 2,000 | 2,000 | | | (a)Contingencies | 5,000 | 5,000 | 1,200 | 4,000 | 2,000 | 2.000 | | E | Egualization Fund[Art.203(1) (g)and (h)) | 6,825 | 7,068 | 10,867 | 8,014 | 9,604 | 15,163 | | | Ofwhich: (@)Allocation inFY2026/27 | 6825 | 7068 | 10867 | 7,867 | 6,867 | 9,602 | | | Arrears | | | | 147 | 2,737 | 5,561 | | F | BALANCE CTO BE SHARED BY THE 2 LEVELS OF GOVERNMENT | -51,274 | 542,470 | 577,106 | 447,905 | 368,469 | 330,101 | Source:-Division of RevenueAct,2025;and actualrevenue and expenditure turnoul. | ITEMDESCRIPTION (Kshs. millions) | FY 2021/22 | FY 2022/23 | 2023/24 | FY 2024/25 | FY | 2025/26*2026/27** | |-----------------------------------------------------------------------------|--------------|--------------|-----------|--------------|---------|---------------------| | County Government allocation from revenue raised nationally of which;- | 377,537 | 375,654 | 391,661 | 394,419 | 427,894 | 438,293 | | (a)EquitableShareofRevenue | 370,000 | 370,000 | 380,645 | 387,425 | 415,000 | 420,000 | | (b)Additional conditional allocations financedfrom revenuesraisednationally | 7,537 | 5,654 | 11,016 | 6,994 | 12,894 | 18,293 | | Balance left for the National-428,811 Government | | 166,816 | 185,445 | 53,486 | -59,425 | -108,192 | *FY 2025/26ApprovedBudgetEstimates ## **National Treasury Proposals 9. National Interest: These are expenditures affecting both levels of governments, which relate to projects and programmes with the following descriptions: - are critical to the achievement of the country's economic development objectives; - potentially will have significant impact on social well-being of citizens; - are anchored in the Vision 2030 and the Medium-Term Plan IV (2023 - 2027); - are addressing the Bottom-Up Economic Transformation Agenda (BETA) of the Government; - have significant resource investment requirements and whose benefits accrue nationwide; and - are contained in the 2026 BPS. The identified programmes of national interest include activities aimed at enhancing security operations; national irrigation and fertilizer subsidy initiatives; Youth Empowerment Programme; provision of national social safety net for vulnerable groups, and school examination fees subsidy and preparation for 2027 national general elections. 10. Allocations to these national interest programs is expected to increase significantly by Kshs. 11.1 billion from Kshs. 125.4 billion in financial year 2025/26 to Kshs. 136.4 billion in financial year 2026/27 on account of increased allocations to all national interest expenditures as shown in Table 2. This increase is primarily attributed to a Kshs. 4.2 billion increase in enhancement of security operations expenditures; Kshs. O.4 billion additional funding to National Safety Net Programme to cover the elderly persons under the Indigent Fund for Social Health Authority; Kshs. 4.0 billion additional funding towards school examination fees; Kshs. 0.1 billion additional funding towards Youth Empowerment Programme; and Kshs. 2.4 billion additional allocation for National irrigation &amp; fertilizer clearance. 11. Public Debt: The Bill has taken into account public debt related costs. These comprise of the annual debt redemption cost as well as the interest payment for both domestic and external debt. In financial year 2026/27, the allocation for payment of public debt-related costs is expected to increase from Kshs. 1,437.9 billion allocated in financial year 2025/26 to Kshs. 1,542.1 billion allocated in the financial year 2026/27, reflecting an increase of Kshs. 104.2 billion. 12. Other National Obligations: As provided for under Article 203(l) (b) of the Constitution,the Bill has also taken into account the requirements for other national obligations, such as, mandatory pension contributions and/or payments, financing for constitutional offices, including statutory bodies. These are estimated to cost Kshs.876.1 billion in financial year 2026/27 up from Kshs. 811.4 billion allocated in the financial year 2025/26, reflecting an increase of Kshs. 64.7 billion. This increase is largely attributed to a significant increase in allocation to the Constitutional Commissions by Kshs. 51.4 billion with allocation to the Independent Electoral Commission (IEBC)and Teachers Service Commission increasing by Kshs. 35.8 billion and Kshs. 15.6 billion, respectively; while allocation to repayments of pensions has increased by Kshs. 7.4 billion. 13. Fiscal Capacity and Efficiency of County Governments: The Bill has proposed an increase of Kshs. 5.0 billion equitable share to county governments. Similarly, it is expected that the county governments will also grow their Own Source Revenue (OsR).The National Treasury has instituted measures to support county governments enhance their revenue collection. These include the National Rating Act, 2024, development of the County Govermments Revenue Raising Process Bill, 2023 the Model Tariffs and Pricing Policy for adoption by county governments and recommendation for an Integrated County Revenue Management System. 14。 County governments'ability to perform the functions assigned to them and meet other developmental needs of the county governments: As explained above, the baseline for the equitable share allocation for the financial year 2025/26 was derived from the Division of Revenue Act, 2025. This baseline is informed by costing of expenditure for devolved functions done at onset of devolution, which has been the basis for equitable share over the years. Kshs. 8.9 billion has been identified by the Ministry of Health as the total attendant remunerations for Universal Health Coverage (UHC) Workers to be transitioned to permanent and pensionable terms within counties in the financial year 2026/27. This allocation is proposed to be allocated to county governments fully as a conditionaladditionalallocation inFY 2026/27. 15.1 Developmental needs of the county governments and their ability to perform their assigned functions: County governments are allocated an equitable share of revenue which is an unconditional allocation to enable them have autonomy to plan, budget and implement development projects based on county priorities and account for the same.In addition, Article 209 of the Constitution has assigned counties revenue raising powers and as such counties are expected to improve and maintain sustained collection of their own source revenues. 16. Additionally, the equitable share to county governments is proposed to increase by an increase of Kshs. 5.0 billion, which is meant to facilitate county governments enhance service delivery in performance of their assigned functions under Part HI of the Fourth Schedule of the Constitution, 17. Thus, the proposed vertical division of revenue proposed in the Division of Revenue Bill, 2026, takes into account the cost of county governments' developmental needs, measures by counties to improve OSR and facilitate the ability to perform County functions as contemplated under Article 203(1) (). 18. Economic disparities within and among counties and.the need to remedy them: The Fourth Basis for horizontal revenue allocation among counties was approved by Parliament in 2025 and is applicable from financial year 2025/26 to financial year 2029/30. The Fourth Basis has taken into account the following parameters; 1) The Baseline Allocation Ratio; 2) Affirmative Action Allocation; and 3) The Fourth Basis indices namely: - (i) Population (45%); (i) Basic Share index (35%); (iii) Poverty Index (12%); and (iv) Geographical Size (8%). The baseline sharing was based on the Third Basis which is premised on eight parameters which relate to devolved functions assigned to county governments in Part II of the FourthScheduleof the Constitution. The three components contained in the Fourth Basis are as follows: - The Baseline Allocation Ratio- This is derived from each County's allocation for Financial Year 2024/25. The Baseline Allocation Ratio ensures that each county maintains what it had already secured in the FY 2024/25 out of KSh. 387.43 billion, holding all Countiesharmless. - The Affirmative Action Allocation- This component provides for equitable share amounting to Kshs. 4.46 billion that has been ring-fenced to cater for and be shared equally among the 12 smaller counties that are not favoured by the other parameters such as population and geographical size. This component considers disparities among counties and aims at equitable distribution ofresources across all countiesin line withArticle 203(1)(g). - The Fourth Basis indices- The third component of the formula shares out the difference amounting to Kshs. 28.12 billion using the parameters of the approved Fourth basis which are Population Index, Equal share Index, Poverty Index and Geographical Size Index. The Population Index is based on the 2019 Kenya Population and Housing Census whereas the Poverty Index is based on the 2022 Kenya Poverty Report by the Kenya National BureauofStatistics 19. Need for Affirmative Action in respect to disadvantaged areas and groups: Kshs. 15.2 billion has been set aside for the Equalisation Fund in the financial year 2026/27. For purposes of Division of Revenue in financial year 2026/27, Kshs. 10.2 billion has been allocated being 0.5 per cent of the last audited and approved revenues for financial year 2022/23 (i.e., Kshs. 2,050.1 billion), in line with Article 204 of the Constitution. Further, the National Treasury has provided an additionalKshs.5.6billiontowardssettlementof arrearstothe Fund, in line with the commitment made to Parliament to progressively clear accrued arrears. The Equalisation Fund is used to finance development programmes that aim at reducing regional disparities among beneficiary counties in water, education,health and infrastructure sectors. 20. Need for Economic Optimization of Each County: Allocation of resources to county govermments was guided by the historical costing of expenditures for functions assigned to the county governments. The equitable share of revenue allocated to county governments in the financial year 2026/27 is Kshs. 420.0 billion, an allocation which is Kshs. 5.0 billion higher than Kshs. 415.0 billion allocations in financial year 2025/26. This is an unconditional allocation which means that the county governments can independently plan, budget and spend the funds. With these allocated resources, therefore, county governments are able to prioritize projects and allocate resources, thus optimizing their potential for economic development. 21。 Need for Flexibility in Responding to Emergencies and Other Temporary Needs: The National Government has allocated KSh.2.o billion towards the Contingencies Fund established pursuant to Article 208 of the Constitution. This Fund will be used to finance urgent and unforeseen expenditures in the two levels of government to meet the demands arising from needs in all Counties that suffer from calamities in the manner contemplated under Sections 19 21 of the Public Finance Management Act, CAP 412A. In addition, the Public Finance Management Act, CAP 412A mandates each County Government to set up County Emergency Fund to respond to urgent and unforeseen expenditures within their jurisdiction. 22. It should be noted that after taking into account all the other factors contemplated under Article 203(1) of the Constitution, including the needs of county governments, there are no resources left to finance other National Government needs, such as defence, roads, energy among others. In fact, the National Government is left with a financing gap of Kshs 108.2 billion to finance National Government other development priorities and non-discretionary expenditures such as salaries for National Government staff. This implies a huge negative financing gap that may occasion additional borrowing which may distort the fiscal framework already set out in the 2026 Budget Policy Statement and negatively impact on the fiscal consolidation plan. ## Summary of Deviations from the Recommendations of the Commission on Revenue Allocation 23. The Division of Revenue Bill, 2026 proposes to allocate county governments an equitable share of Kshs. 420.0 billionfrom theshareablerevenueraised nationally to beshared among county governments using the Fourth basis formula for sharing revenue approved by Parliament under Article 217 of the Constitution. The Commission on Revenue Allocation (CRA), on the other hand, recommends county governments' equitable share of revenue of Kshs. 458.9 billion as an unconditional allocation to be shared among county governments using the fourth basis formula for sharing revenue approved by Parliament, pursuant to Article 217 of the Constitution. The proposed allocation by the National Treasury and CRA has occasioned a variance of Kshs. 38.9 billion. - 24。 The variation of Kshs. 38.9 billion between the proposed allocation by the National Treasury and CRA is occasioned by:- - (a) Adjustment for Revenue Growth from the baseline:-While the National Treasury has proposed an increase of Kshs. 5.0 billion to county governments' equitable share, from the FY 2025/26 baseline, the CRA has proposed an increase of KSh.35.0 billion, in FY 2026/27, resulting into a difference of Kshs. 30 billion. Whereas CRA allocation is largely premised on projected revenue performance there may be a likelihood of this growth not being attained, as demonstrated in paragraph 6(a) whereby projected ordinary revenues for FY 2025/26 underperformed by Kshs 115.4 billion as at end of December 2025. Secondly, most of the projected ordinary revenue will go towards financing mandatory expenditures under Article 203 (1) of the Constitution including public debt, as shown in Table 2. In fact, taking into Constitution and allocating counties the proposed equitable share ofKshs. 420.0billionandKSh.18.3 billionas additional conditionalallocationsfinancedfromrevenuesraisednationally, the national government is left with a deficit of Kshs. 108.2 billion. - (b) Remuneration of Universal HealthCare (UHC)Workers:CRA has proposed an allocation of Kshs. 8.94 billion, as equitable share, in FY 2026/27 to fully transition UHC workers to permanent and pensionable staff. Article 187 of the Constitution require that, when a function is transferred from one level of government to another, arrangements shall be made to ensure that the resources necessary for the performance of the function are transferred. In this regard, therefore, both the National Treasury and the CRA have proposed that the attendant total resources for remunerations of the^ UHC workers be allocated to county governments in FY 2026/27. However, while the CRA has proposed that these resources be allocated as part of the County Equitable Share of revenue in their recommendations on division of revenue for FY 2026/27, the National Treasury proposes that these resources be allocated as a conditional additional allocation to county governments through the County Governments Additional Allocations Bill, 2026. - (c) Assumptions Used in Arriving at the Respective Shares: Both the National Treasury and the CRA have made varying assumptions in arriving at the respective proposals on County Equitable Share for FY 2026/27, as discussed in paragraph 26 for the National Treasury; and paragraph 27 for CRA. Table 3 analyses the approaches by CRA and the National Treasury in computing the proposal on the division of revenue between the national and county governments in FY 2026/27. Table 3: Comparison of approaches towards recommendations of the Commission on Revenue Allocation and the National Treasury on the equitable share of revenue proposed for FY 2026/27 | Expenditure Item | CRA | National Treasury | Variance | |----------------------------------------------------|------------|---------------------|------------------| | Expenditure Item | A(million) | B(million) | C=(A-B(million)) | | EquitableRevenueShare in FY2025/26(Base line) | 415,000 | 415,000 | | | Add: | | | | | Increase in Revenue Allocation (a+b) | 43,938 | 5,000 | 38,938 | | ofwhich | | | | | Revenue growthfrombaseline | 35,000 | 5,000 | 30,000 | | Transfers of UHC workers (RemunerationforUHCStaff) | 8,938 | | 8,938 | | TOTAL EQUITABLE OF REVENUE=(1+2) | 458,938 | 420,000 | 38,938 | Source:TheNational Treasury ## Assumptions Used in Arriving at the Respective Shares 25. In arriving at the respective allocations to National and County level of governments, the National Treasury was guided by the following economic assumptions: 2. (i) That there will be no major economic shocks negatively affecting forecasted revenue in financial 2026/27; 3. (ii) That Ordinary revenues projected at Kshs 2,901.9 billion attained. This revenue performance will be underpinned by the on-going reforms in fiscal policy and revenue administration; 4. (iii) That fiscal deficit shall reduce from an estimated 5.9% of GDP in FY 2024/25 to 5.3 percent of the GDP in FY 2025/26 and 3.2% of GDP over the medium term with strong primary surplus so as to stabilize growth in public debt; 5. (iv) The Equalization Fund arrears will be financed from the National Govermment's share of revenue; 6. (V) That there shall be stability in interest rates and foreign exchange rates; 7. (vi) That inflation shall remain stable within the government target of 5±2.5 percent; 8. (vii) ) Implementation of the Medium-Term Revenue Strategy (MTRS) for the period FY 2024/25 to FY 2026/27 shall progressively strengthen tax revenue mobilization efforts to 20.0% of GDP over the medium term; 9. (viii) That projected public debt/GDP ratio will decline to the debtanchorof55±5percentofGDPinPVtermsover the medium term, supported by the medium-term fiscal consolidation efforts; 10. (ix) Sustained positive Credit Rating by various Agencies including Moody's, S&amp;P and Fitch, will positively influence Kenya's borrowing costs and access to international capital markets; 11. X A sustained national economic growth momentum with projected GDP growth of 5.3 percent in 2026; - (xi) That County governments will continue to enhance their Own Source Revenues to reduce overreliance on national transfers and improve their fiscal sustainability. - 26.1 In arriving at the allocation of Kshs. 458.9 billion, the CRA was informed by the following factors: - (a) A stable macroeconomic environment that is characterized with low inflation, low interest rates and a stable exchange rate; - (b) A projected economic growth of 5.3 per cent in the medium term; - (c) Projected revenue growth of 13.1 per cent that will increase revenue to Kshs. 2,982.3 billion for financial year 2026/27 from 2,639.7 billion in the financial year 2025/26; and - (d) The need to provide adequate resources for each level of government to finance functions assigned to it by the Fourth Schedule of the Constitution. ## Conclusion 27. The proposals contained in the Bill considers the financial objectives set out in the 2026 BPS and are intended to achieve fiscal sustainability against the backdrop of escalating expenditure pressure on the fiscal framework occasioned by an increase in Consolidated Fund Services (CFS) and the persistent underperformance of ordinary revenue. 2. 28.: The proposed Kshs. 420.0 billion allocations among county governments as equitable share of revenue is equivalent to 20.5 percent of the audited and approved revenue for financial year 2022/23. This is above 15 per cent minimum threshold required under Article 203(2) of the Constitution. The proposed equitable share allocated to county governments in the Division of Revenue Bill, 2026 has also taken into account the approved Fourth Basis Formula for Revenue Allocation pursuant to Article 217 of the Constitution. I certify that this printed impression is a true copy of the Bill passed by the National Assembly on the 10*h March, 2026. <!-- image --> LAMWMUULLLOS ClerkoftheNationalAssembly Endorsed for presentation to the Senate in accordance with the provisions of Standing Order 142 of the National Assembly Standing Orders. SpeakerOfiheNationalAssembly <!-- image -->