County borrowing locked at 5pc of revenues

County government borrowing will be restricted to five percent of annual audited revenues.

This is after ongoing discussions between the regulator and the devolved units of finding a structured and sustainable way to take debt.

The decision was reached during a meeting between county governors and Deputy President William Ruto.

According to the central bank the move is expected to bolster prudent financial management, even as the devolved units look to grow funds at their disposal.

The move comes after a protracted battle between counties and the CBK over its insistence that the devolved units are not allowed to borrow funds.

The CBK had also issued a notice to banks not to lend to counties without a guarantee from the national treasury.

Section 107(3) of the Public Finance Management Act, 2012 provides that short-term borrowing by county governments be restricted to the management of cash flows and shall not exceed five percent of the most recently audited revenues of a devolved unit.

“A county government may borrow only if the national government guarantees the loan; and with the approval of the county assembly,” reads Article 212 of the Constitution.