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NEWS & CURRENT AFFAIRS

The Nairobian

Pay up or miss out on fund, councils warned

Busia

By The Standard Business | Nov 24, 2009

By Maseme Machuka

Deputy Prime Minister Musalia Mudavadi has said all debt owed to Local Authority Provident Fund (Laptrust) must be paid by June next year.

This would enable local authorities access Local Authorities Transfer Fund (Latf) from the Treasury.

Mr Mudavadi, who is also Local Government Minister, said local authorities have not exhausted all avenues to be able to pay the debt.

The minister was responding to Association of Local Government Authorities of Kenya Chairman Taraiya ole Koros’ plea to postpone the deadline to enable local authorities pay the debt.

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Local authorities owe Laptrust about Sh2 billion, which is crippling its investment plans.

Mr Koros had asked the minister to shelve the order of freezing Latif saying it "will adversely affect councils if the order was to be upheld".

"We are looking at ways of trying to offset the debts by the said deadline; but if we cannot achieve that by the expiration of the deadline, then we ask the minister to shelve the deadline," added ole Koros.

Mudavadi said there were available options to offset the debt and, therefore, "they should not ask about shelving of the deadline".

He said: "I know there are available options to offset the debts. Let the councils talk to financial institutions and come up with amicable ways of settling the debts. I will still uphold my deadline as said. If by June 2010 the debt still stands, then all local authorities, which have not cleared the debt will not qualify for Latf."

Important deliberations

Mudavadi said the authorities should honour their positions and pay.

"Honour does not lie in not paying debts but in settling them," said the minister.

Koros assured the minister the councils were doing everything possible to clear the debt. He said local authorities were considering asking a local financial institution to bail them out as they seek ways to pay the debt.

"We have held important deliberations and soon a formula shall be found to look into the matter," added Ole Koros.

Latf was established in 1999 through LATF Act No. 8 of 1998 to improve service delivery and financial management, and reduce outstanding debt of local authorities.