Senators support CBK order on county borrowing
Senate Finance Committee chair Billow Kerrow during a hearing where the Central Bank Governor Dr Patrick Ngugi Njoroge appeared to discuss the falling shilling at County Hall on July 27, 2015. He has supported CBK's directive warning counties against borrowing. PHOTO | DIANA NGILA | NATION MEDIA GROUP
What you need to know:
- Senators have supported a directive by the Central Bank of Kenya warning counties against borrowing.
- Senate Finance Committee chairman Billow Kerrow and Nyamira Senator Mong’are Okong’o, a member of the Public Accounts Committee said the directive by the CBK was long overdue as governors might abuse the borrowing.
- The CBK, in a January 12 circular, warned financial institutions that giving loans to counties without a guarantee from the national government was against the law.
Senators have supported a directive by the Central Bank of Kenya warning counties against borrowing, in a move that could spark fresh row between them and governors.
Senate Finance Committee chairman Billow Kerrow and Nyamira Senator Mong’are Okong’o, a member of the Public Accounts Committee, on Tuesday said the directive by the CBK was long overdue as governors might abuse the borrowing.
They claimed that the CBK and National Treasury had a constitutional obligation to ensure counties did not put the government under liability.
“What governors want is to borrow without any control, and that cannot happen,” said Mr Kerrow, the Mandera senator.
He added: “A governor’s office is elective and if they borrow anyhow and leave office without paying, they put the next government in a bad situation.”
Mr Kerrow said the fact that counties’ pending bills stood at Sh37 billion, according to a Controller of Budget report, was “the red flag for counties not to borrow anyhow.”
The CBK, in a January 12 circular, warned financial institutions that giving loans to counties without a guarantee from the national government was against the law.
SMALL KINGS
Mr Mong’are said governors were becoming “small kings” and running counties without the oversight of the National Treasury and the Senate.
“If commercial banks will lend to counties without approval by the National Treasury, they have to recover them within that governors’ tenure” he said.
Governors on Monday said the directive was in bad faith.
“So far, no county has even borrowed but the CBK and Treasury are quick to warn commercial banks. It is them that delay funding to counties, how do they expect us to work?” Asked Council of Governors’ finance committee chairman Wycliffe Oparanya.
The Kakamega governor said that the provision for counties to borrow only 20 per cent of its last year’s revenue was a “drop in the ocean.”
“The national government is borrowing way beyond its means, and when we have the assemblies approve ours to borrow, they warn commercial banks. They have no moral authority to police us on loans at all,” said Mr Oparanya.
Mr Mong’are supported speedy release of county funds.
“Though we do not agree on unchecked borrowing, governors are right that Treasury should release money early,” he said.
