A cash crunch is looming at City Hall after a bitter standoff between Nairobi Governor Johnson Sakaja and City MCAs left the county without an approved budget for the 2026/27 financial year by the June 30 statutory deadline, threatening to stall development projects and restrict government spending.
The impasse means the county government enters the new financial year operating under emergency provisions of the Public Finance Management (PFM) Act, allowing it to access only up to 50 per cent of the previous year's approved budget to finance essential services until a new budget and Appropriation Act are passed.
The failure to approve the budget by June 30 also places the county in breach of the timelines set out in the PFM Act, which requires county assemblies to debate and pass budget estimates and the accompanying Appropriation Bill before the start of a new financial year on July 1.
The budget row has exposed widening cracks between Governor Sakaja and Members of the County Assembly, with legislators accusing the executive of attempting to push through critical financial documents without adequate scrutiny.
County Assembly Majority Leader Peter Imwatok on Tuesday said the executive had ignored repeated summons to explain the budget proposals before the Assembly proceeded on recess.
He said the removal of former Finance County Executive Committee Member Charles Kerich also contributed to delays in finalising the budget.
"If they were ready, they could have requested the Assembly to convene a Special Sitting and pass the budget. But the issues raised by the Assembly must first be answered. We cannot process more than three documents in one sitting," Mr Imwatok said.
He accused the executive of attempting to sneak in the annual budget estimates, a supplementary budget and proposals to borrow additional funds without giving MCAs sufficient time to interrogate them.
"We are asking questions that have not been answered. We want details of this borrowing, why the supplementary budget is being introduced on the last day of the financial year, who prepared it and whether the Assembly was involved." he added.
Mr Imwatok also faulted the executive for failing to release the Assembly's disbursement schedule and settling its pending bills.
"The Assembly's allocation as required by law has not been released. There are many outstanding issues. We have asked the government to address them and we are waiting for a response."
Majority Whip and Kilimani MCA Moses Ogeto warned that the budget stalemate could cripple development projects across the capital.
"The MCAs want to understand the budget, especially the development expenditure, but the Executive has not explained anything to us," Mr Ogeto said.
He also blamed delays in formally gazetting Ibrahim Nyangoya Auma as the substantive Finance executive saying the Assembly should not shoulder responsibility for the crisis.
"There is a crisis because of the delay in gazetting the Finance CECM. The law is clear. Now that he has been gazetted, he should come before the Assembly and explain the budget."
However, a senior official in the county executive shifted the blame to the Assembly, insisting the executive had completed its work.
"From our side we were ready. We had the budget and everything. When we asked the MCAs to come and pass it, they said they were on recess and unavailable. Either way, we shall continue operating within what the law allows, which is access to 50 per cent of the previous budget," the official said.
The budget dispute comes amid growing concerns over the integrity of the county's 2026/27 spending plan. A section of MCAs has questioned several allocations, arguing that key changes were introduced without adequate consultation with the Assembly, further fuelling mistrust between the Executive and legislators.
The concerns were amplified after Woodley/Kenyatta Golf Course MCA Davidson Ngibuini, also known as DNG formally wrote to Mr Sakaja, the Controller of Budget and other oversight agencies alleging "illegalities and irregularities" in the proposed budget.
In the letter dated June 25, the MCA claimed that Sh1 billion allocated for the Dishi Na County school feeding programme had been irregularly classified as development expenditure instead of recurrent expenditure, contrary to the Public Finance Management Act.
He argued that feeding school children is a recurrent operational expense and should not be used to inflate the county's development budget.
He further claimed that once the Health Committee reversed the allocation back to recurrent expenditure, Nairobi's development spending fell below the constitutional and statutory threshold requiring at least 30 per cent of the budget to be allocated to development.
In the letter, the MCA warned that members would resist attempts to push through the budget without addressing the concerns, saying the Assembly's oversight role required legislators to scrutinise the estimates before approval. He urged the county executive to rectify the alleged anomalies before the budget is considered by the Assembly.
“The School Feeding Programme has been illegally and irregularly misappropriated as a Development Vote instead of a Recurrent Vote to the tune of Sh1 billion. Clearly, feeding school children, as it is, does not fall under the Development Expenditure threshold. It is a recurrent expenditure,” he said.
Under the Public Finance Management Act, failure to pass the budget by June 30 does not shut down county governments but significantly limits their financial operations.
Counties may only withdraw up to half of the previous year's approved budget to sustain essential recurrent expenditure such as salaries and critical services while awaiting approval of the new budget.
The restrictions effectively freeze new development spending, halt fresh procurement for capital projects, and delay payments to contractors until the County Assembly passes the budget and the Controller of Budget authorises normal withdrawals.
