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State firms, referral hospitals hit by Sh20bn cash gap
Medical Services Principal Secretary Dr Ouma Oluga addresses journalists during the marking of World Cancer Day at Kenyatta National Hospital on February 4, 2026.
Some 10 State agencies, including five national referral hospitals, have been hit by a funding shortfall of Sh19.8 billion, impacting payment of staff salaries, pension, gratuities, and statutory deductions.
The State Department for Medical Services said that the National Treasury's decision to impose across-the-board budget cuts of between 30 percent and 40 percent on the net recurrent budget of the public agencies has affected payment of personnel emoluments.
“The agencies have been compelled to compensate or supplement the personnel emolument shortfalls from their appropriations-in-aid (A-I-A) collections, which are already constrained, resulting in failure in remitting statutory and payroll obligations,” Ouma Oluga, the Principal Secretary for Medical Services, told MPs.
“This exposes these agencies to potential litigation and Agency Notices from the Kenya Revenue Authority (KRA). The combined summary of personnel emoluments shortfalls for Semi-Autonomous Government Agencies (Sagas) is Sh19.8 billion.”
A-I-A are non-tax revenues such as fees, levies, fines, and charges collected by government entities while offering services.
Appearing before the National Assembly’s Health committee to defend the State Department for Medical Services' additional funding request under the Supplementary Budget 1, of 2025/26, Mr Olunga said Kenyatta National Hospital has a funding requirement of Sh15.05 billion but was allocated Sh8.68 billion, leaving a gap of Sh6.4 billion for personnel emoluments.
He said Moi Teaching and Referral Hospital has a shortfall of Sh3.44 billion after the Treasury allocated Sh6.2 billion out of the required Sh9.6 billion.
Kenyatta University Teaching, Research and Referral Hospital needs Sh4.25 billion out of the total requirement of Sh6.532 billion. KUTRH was allocated Sh2.28 billion for payment of personnel emolument in the 2025/26 financial year.
Documents tabled before the committee chaired by Seme MP James Nyikal show that Jaramogi Oginga Odinga Teaching and Referral Hospital (JOOTRH) has a salary funding shortage of Sh1.76 billion after it was allocated Sh1.33 billion in the current financial year.
Mr Olunga said JOOTRH requires Sh3.09 billion in the current financial year to pay staff emoluments.
Mwai Kibaki Teaching and Referral Hospital needs an additional Sh751 million for personnel emoluments. The Treasury has allocated Mwai Kibaki Sh651 million out of a funding requirement of Sh1.4 billion.
Other entities that require funding to meet personnel emolument shortfalls are the Kenya Medical Supplies Agency (Sh1.12 billion), Kenya Medical Research Institute (Sh497 million), National Cancer Institute (Sh62 million), and Social Health Authority (Sh1.28 billion).
Mr Olunga said funding for personnel emoluments was slashed by the Treasury without concurrence by the Ministry and the Saga’s.
He said the Ministry received payment for the implementation of the 2017 Doctors’ Collective Bargaining Agreement (CBA) through the State Department of Public Health and Professional Standards.
“The medical staff in the State Department for Medical Services did not get their arrears, which include payment of basic salary and Emergency Call Allowance for doctors (Sh557.2 million) and Clinical Psychologists’ allowance for the period 2020-2023 (Sh100.2 million),” Mr Olunga said.
“The State Department requests this esteemed committee to consider allocating funds to pay the arrears, like in the State Department of Public Health and Professional Standards.”
Mr Olunga asked the committee to allocate Sh1.2 billion, which is needed to implement presidential directives and pronouncements.
He said the State Department has received various presidential directives and pronouncements to construct or upgrade various public hospitals to meet the healthcare needs of the public by making healthcare accessible and affordable in line with the Universal Health Coverage (UHC).
“The State Department reviewed the pronouncements and prioritised the implementation of infrastructure projects that require Sh1.2 billion to implement the pronouncements,” he said.
Mr Olunga also asked lawmakers to allocate Sh837.1 million for various infrastructure projects to upgrade various Level 2,3,4 and 5 health facilities at the county level.
He said the projects are at different stages of implementation without budgetary allocations in the financial year 2025/26
