Counties seek loans to pay workers amid cash crunch

Bomet Governor Isaac Ruto at a past event. He said his government borrowed money from a bank to pay workers’ salaries following the National Treasury's delay in releasing money to counties. FILE PHOTO | NATION MEDIA GROUP

What you need to know:

  • Governors said they took the decision to prevent their counties from plunging into a financial crisis.
  • Governor Ongwae said the National Treasury has not released money since June.

Some counties are now borrowing money from banks to pay workers’ salaries following the National Treasury's delay in disbursing funds.

Governors said they made the decision so as to prevent their counties from plunging into a financial crisis that could paralyse services.

Bomet and Vihiga are some of the counties that have sought bank loans to pay salaries.

Bomet Governor Isaac Ruto, Ahmed Abdullahi (Wajir) and James Ongwae (Kisii) said on Tuesday that counties turn to the banks because of staff salaries.

Mr Ruto, a former chairman of the Council of Governors, said the delay is worse for employees who have bank loans because of high interest rates.

“We have been forced to go for overdrafts from banks to pay salaries for workers because of a delay by the National Treasury to release money,” he told the Nation by phone.

Mr Abdullahi blamed bureaucracy at the Treasury. According to the governor, sometimes county officials camp at the Treasury for weeks as they wait for money.

“There are times when governors make arrangements with bankers to borrow money. It is based on rapport,” he said.

Governor Ongwae said the Treasury has not released money since June.

“How do you expect counties to pay salaries and run operations without resources from the Treasury?” he said.

IFMIS

Last week, Kakamega Governor Wycliffe Oparanya, who is the Council of Governors Finance Committee chairman, said the delay in disbursing cash was due to the closure of the Integrated Financial Management Information System before the end of the financial year.

“Given that the system was closed in June, there is going to be a big delay that may ground operations in most counties,” he said.

During the last financial year, Bomet County borrowed money, but the county assembly has rejected a similar bid this year.

The decision on whether to use bank overdrafts is usually at the discretion of the assemblies, which can approve or reject them.

In their agreement with banks, county governments ask for advance payment of workers’ salaries. The loan is then repaid as soon as money is released by the Treasury.

Treasury Principal Secretary Kamau Thugge has, however, defended the ministry, saying some counties are unable to use funds allocated to then on time.

“The failure by counties to pay staff salaries, including health workers, is not due to delayed disbursements by the National Treasury.

“County governments with the least balances at the Central Bank of Kenya received their transfers by (the) end of May,” Dr Thugge said in a press statement.

The Vihiga County government has written to its assembly seeking to borrow Sh200 million, while in Kakamega, some county services might be grounded because of lack of money.