The Intergovernmental Budget and Economic Council (IBEC) has rejected the proposal by county governments to access short-term loans from the Central Bank of Kenya.
While making the announcement on Monday, Deputy president William Ruto explained that the proposal was rejected following an agreement by East African countries.
“The countries [agreed] that governments should avoid borrowing from their central banks. The position is to be to harmonised by 2021," he said.
"The proposal was rejected because the national government is in the process of withdrawing from short-term borrowing."
He spoke during an IBEC meeting in Karen, Nairobi, that governors and representatives from the National Treasury and the Commission on Revenue Allocation attended.
The DP noted, however, that Sh62 billion of money allocated to counties was paid in the first quarter and that only 20 counties are yet to receive their share.
He further said the council agreed on a framework that will enable counties to assess their assets for creditworthiness.
“Through this, counties will be able to access up to 20 percent of their revenues from their own and sharable revenues,” he said.
Regarding debts, the DP said pending bills from 2017/2018 had declined from Sh108 billion to Sh34.5 billion in the current financial year.
“Of the Sh2.7 billion that is owed to sugarcane farmers, Sh2.1 billion has been paid," he also noted.
Dr Ruto also said that following an agreement with the Chief Justice, counties will be required to transfer municipal courts to the Judiciary, which will facilitate the spaces they will occupy.
“We have asked Treasury, the Judiciary and CRA to see how to build the capacity of municipal courts and enforcement officers to make them more professional, thereby alleviating the burden on counties," he said.
Among those present was Council of Governors Chairman Wycliffe Oparanya (Kakamega).
While appreciating the need for the national government to strengthen its working relationship with counties, Mr Oparanya said they are committed to clearing their bills.
“This will make resources available to suppliers, most of whom are small and medium-sized enterprises, and cause them to grow,” he said.