Governors want approval to borrow from foreign lenders

Tuesday January 12 2016

Council of Governors chairman and Meru Governor Peter Munya at the Meru County Assembly before giving the state of the county address on December 03 2015. The Meru Government is set to hold a Diaspora Investors' Conference on Saturday. PHOTO | PHOEBE OKALL | NATION MEDIA GROUP

Council of Governors chairman and Meru Governor Peter Munya at the Meru County Assembly before giving the state of the county address on December 03 2015. The Meru Government is set to hold a Diaspora Investors' Conference on Saturday. PHOTO | PHOEBE OKALL | NATION MEDIA GROUP  

By PATRICK LANG'AT
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Governors now want to borrow funds from foreign lenders without going through the national government, saying their time had come to be independent.

Currently, county governments cannot borrow externally, but are allowed to receive grants with the approval of the National Treasury.

The Council of Governors said the Constitution allows regional governments to borrow independently after three years of devolution, adding that the funds provided by the national government are not enough to implement their projects.

In a statement issued on Monday, the council’s chairman, Mr Peter Munya, says: “We urge the CRA (Commission on Revenue Allocation) to issue guidelines so that county governments can borrow to supplement infrastructure development, which has stalled due to lack of funds.”

The requirement to make the Treasury aware of a county’s borrowing is because the national government is the only one represented abroad and can be sued if a county, an entity seen as its subsidiary, defaults.

“A county government may borrow only if the national government guarantees the loan; and with the approval of the county assembly,” says the Constitution.

Monday, Mr Munya said it was time counties entered into borrowing agreements independently.

“The previous agreement was that we needed three years to prepare ourselves to manage borrowed money. Now we want that agreement honoured because there are minutes to that effect,” said Mr Munya, who is also the Meru governor.

Bungoma Governor Ken Lusaka said: “The national government has already done a lot of damage by borrowing left, right and centre, hitting the debt ceiling and crowding the space for counties to access the funds. No more excuses now and counties must be allowed to fund their projects.”

Though Kisumu Senator Anyang’ Nyong’o supported the push by counties, he warned that airtight procedures must be put in place to ensure the system is not abused by the devolved units.

“The borrowing should not be done without the knowledge of the Treasury. If the economy and projects to be funded are sound, the Treasury must not have a problem with counties’ foreign borrowing,” said Prof Nyong’o.

The senator warned: “If not monitored, we run the risk of a rogue county government borrowing beyond its means. Not that the national government is any different, but we would rather deal with one rogue national government than multiple counties bursting their debt ceilings.”

Counties have criticised the national government over delays in releasing cash to them. They have accused the national government of sabotaging their economic development by not allowing them to borrow externally and even from commercial banks.