County governments could soon begin accessing funds through direct borrowing from external donors, easing pressure for more resources to be allocated to the devolved units.
This would happen as soon as policy guidelines on sub-national borrowing is finalised. At present, external borrowing by any county government must be approved by both National Treasury and the respective county assembly.
“While we have achieved milestones in the one and a half years of rolling out devolution, there are significant challenges that we must address. There is need to discuss alternative sources of funding for county governments through borrowing,” said Deputy President William Ruto.
He made the remarks while opening a two-day conference on ‘Managing Sub-national Borrowing in Kenya’, ending today at the Safari park Hotel, Nairobi yesterday.
This national conference whose theme is ‘Responsible borrowing for a successful Devolution’, brought together experts from Nigeria, Brazil and South Africa to share their experiences on devolution.
Officials from the National Treasury, Council of Governors, Development Partners and the Intergovernmental Budget and Economic Council (IBEC) through its various committees have been seeking an acceptable framework for effective debt management and equitable sharing of guarantees among the 47 counties.
In order to supplement revenue allocated to county governments through the constitutional mechanism for sharing revenue between the two levels of government, the Constitution also allows county governments to borrow with the approval of their respective county assemblies, provided there is a guarantee from the national government.
“There is, however, no operational framework to guide the process of issuance of national government guarantees,” said Ruto. The conference has been organised to provide an opportunity for Kenyan policy makers to interact amongst themselves and with international and local experts, to share experiences as well as deliberate upon key building blocks of sustainable sub-national borrowing.
In its recent findings, the World Bank highlights the need for mechanisms to deal with the large debt stock, which counties have inherited from the former Local Authorities.
The study recommended short- and long-term interventions to support the Government’s ongoing initiatives related to public debt management.
A number of functions have been transferred from national to county governments in the recent past.
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