Governors in Kenya warned on illegal loans

Governors who borrow funds externally without the approval of county assemblies and the National Treasury will be prosecuted.

According to the Senate, Commission of Revenue Allocation (CRA), Treasury and the Intergovernmental Technical Relations Committee (ITRC), any borrowing secured by governors without following procedure is illegal.

They stressed that there is no collective responsibility in breach of the law, thus those concerned must take individual responsibility

They also warned that the borrowing in total disregard of the Constitution and the Public Finance Management (PFM) Act will put many counties in jeopardy, since when counties default on repayments, the national government will have to shoulder the responsibility.

Legal documents

ITRC Chair Karega Mutahi, while sharing concerns raised by various delegates, majority of them MCAs, stressed that debt approvals must be accompanied by three legal documents. “The debt management strategy to spell out how the money will be used, county assembly’s approval and guarantee by the National Treasury. If any is omitted, then the borrowing is illegal. It should be dismissed,” said Prof Mutahi.

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Parliamentary Budget Office Representative Phyllis Makau, who represented Treasury, criticised counties for their massive borrowing. She stressed that they must adhere to the rules and regulations. “With development loans, the counties must have a debt strategy paper, which must get the nod from the assembly, be approved by Treasury, discussed at the Intergovernmental Budget and Economic Council before being discussed in the Cabinet,” she said.

Meru Senator Kiraitu Murungi sought clarification from Treasury about the requirement by counties when borrowing, taking into account the fact that his county has secured Sh7 billion payable within seven years without reference to the ministry and the assembly.

Senator Mutula Kilonzo Jnr (Makueni) who chaired the session on the county budget-making process, compliance to finance law and oversight at the ongoing inaugural legislative Summit, warned that external borrowing was a worrying trend.