Marginalised counties to receive Sh16.8 billion in Equalisation Fund disbursal

Over Sh16.8 billion will be disbursed to support essential services in marginalised parts of Kenya after the National Assembly approved the Equalisation Fund Appropriation Bill, 2025.

The funds will finance key infrastructure, including water, electricity, roads and health services in underserved areas during the 2025/26 financial year.

The Equalisation Fund Appropriation Bill (National Assembly Bill No. 21 of 2025) seeks to actualise Article 204(1) of the Constitution, which provides for the establishment of the Fund to accelerate development in historically marginalised regions by improving access to basic services.

According to the Bill, the total amount approved, Sh16.8 billion, includes Sh6.2 billion rolled over from the 2024/25 financial year and Sh10.6 billion allocated for the 2025/26 period.

Of the current year’s allocation, Sh7.852 billion represents 0.5 per cent of the most recently audited national revenue, while Sh2.747 billion constitutes arrears recognised under the Division of Revenue Bill, 2025.

Administrative and oversight expenses for the Equalisation Fund Board and Secretariat have been allocated Sh504 million, an amount that falls within the three per cent cap prescribed in the Public Finance Management (Equalisation Fund Administration) Regulations, 2021. The remaining Sh16.296 billion will directly support projects in 1,424 marginalised areas.

Counties with the highest levels of marginalisation, identified under the Second Policy on Marginalisation, will receive more than 60 per cent of the total funding. Turkana County is set to get the highest allocation at Sh1.86 billion, followed by West Pokot (Sh1.7 billion), Narok (Sh1.3 billion), Mandera and Wajir (Sh1.2 billion each), Samburu (Sh1.1 billion), Garissa (Sh1 billion) and Baringo (Sh967 million).

To ensure transparency and accountability, the Bill stipulates that the funds will not be deposited into the County Revenue Fund. Instead, each county will establish a special-purpose account at the Central Bank of Kenya where the funds will be held and managed.

“This arrangement is intended to guarantee that the funds are utilised strictly for their designated development functions,” reads the Bill.

The Bill further authorises the Controller of Budget to approve disbursements, stating that such approval will be granted upon submission of written instructions from the Secretary of the Equalisation Fund Board, relayed through the National Treasury. Once cleared, the Central Bank of Kenya will proceed to effect the payments, thereby streamlining the fund release process.

In its report to the House, the Budget and Appropriations Committee, chaired by Alego Usonga MP, Samuel Atandi noted that while the Bill proposed a total allocation of Sh10.6 billion for the 2025/26 financial year, the budget estimates previously approved by Parliament only provided for Sh9.59 billion.

The Committee also raised concerns over the historical underfunding of the Fund. It revealed that as of June 2024, only Sh13.4 billion, equivalent to 22.4 per cent of the cumulative Sh59.96 billion due to the Equalisation Fund, had been disbursed since its inception.

The outstanding arrears currently stand at Sh46.5 billion.

Once enacted, this will become the third Equalisation Fund Appropriation Act. The first, passed in 2018, allocated Sh12.4 billion for the 2014/15 to 2016/17 financial years under the First Marginalisation Policy.

The second, enacted in 2023, approved Sh10.3 billion for the 2021/22 and 2022/23 financial years under the Second Policy. However, the 2023 Act was never implemented after the entire allocation was revised to zero in the Supplementary Estimates for FY 2022/23.