Many county Governments might run into financial troubles if the continued borrowing without check from National Government is unchecked. According to the Star Eight county governments borrowed more than Sh2.25 billion from banks without the national Treasury’s approval, Controller of Budget Agnes Odhiambo has told Parliament.
In her half-year budget review report, Odhiambo said the counties could run into unsustainable debt if borrowing is not regulated. “Some counties borrowed from commercial banks without being guaranteed by the national Treasury. There were also instances where some counties borrowed without obtaining approval from the county assembly,” she said.
Murang’a had an outstanding bank overdraft facility of Sh200 million with KCB. “This borrowing was not in line with the Public Finance Management Act’s rules on short-term borrowing,” Odhiambo said.
Nairobi accessed an overdraft facility of Sh848.12 million without guarantee from the national government and approval from the county assembly. However, it has repaid the overdraft.
The Nandi government approved Sh696.5 million borrowing for purchase of road construction equipment, but the county government did not ask the Treasury to be a guarantor.
Taita Taveta borrowed Sh185 million from KCB, which was neither guaranteed by the national government nor was it approved by the county assembly. Tharaka Nithi borrowed Sh85 million from the Cooperative Bank of Kenya.
Trans Nzoia obtained an overdraft facility of Sh30 million without approval. The constitution requires counties to borrow with approval from the county assembly, and only if the national government guarantees the loan.
The Public Finance Act gives Treasury CS Henry Rotich powers to guarantee loans subject to approval by Parliament.
“All future borrowing must adhere to provisions,” Odhiambo said. She said some counties have not established a database of projects. “In order to ensure the counties achieve their developmental goals, we recommend that they develop and implement robust monitoring and evaluation frameworks,” Odhiambo said.
During the first six months of the 2015-16 financial year, revenue collection improved to Sh13.92 billion, from Sh13.08 billion.
This has been attributed to automation of revenue collection and enhanced capacity of revenue collection staff.