Kenyan county chiefs suffer a major legislative blow as the Senate blocks proposals for direct borrowing, citing mounting public debt and transparency concerns.

The Kenyan Senate has decisively thwarted an ambitious legislative push by the Council of Governors (CoG) that would have granted county governments the autonomy to borrow funds directly from domestic and international markets. The rejection highlights a growing rift between the national legislature and devolved units over financial management.

This decision is pivotal for the trajectory of Kenya's economic policy. As the national public debt continues to strain the exchequer, the Senate's move underscores a deep-seated apprehension regarding the fiscal discipline of county administrations, many of which have been repeatedly flagged by the Auditor General for gross financial mismanagement.

The Push for Financial Autonomy

For years, county governors have aggressively lobbied for the right to incur debt independently of the National Treasury. Proponents of the initiative, spearheaded by vocal members of the CoG, argue that the current funding model—which relies heavily on delayed disbursements from the national government—stifles local development. They contend that access to credit markets would allow counties to finance massive infrastructure projects, from localized healthcare facilities to modernized agricultural processing plants.

However, the proposed legal framework required stringent oversight mechanisms, which the Senate deemed insufficient. Lawmakers argued that granting borrowing powers to all 47 counties could expose the country to severe macroeconomic risks, particularly given the volatile nature of the Kenyan Shilling (KES) and rising global interest rates.

Audit Jitters and Accountability Fears

The primary catalyst for the Senate's rejection stems from the alarming reports consistently produced by the Office of the Auditor General. An overwhelming majority of counties have struggled to account for billions of shillings allocated annually, raising severe red flags about their capacity to manage independent debt portfolios. Key concerns raised during the Senate debate include:

• Pending Bills: Counties currently owe suppliers and contractors an estimated KES 150 billion, a figure that continues to grow despite numerous presidential directives to clear the arrears.
• Misappropriation of Funds: Audit reports have detailed massive irregularities in procurement processes, phantom projects, and inflated payrolls featuring "ghost workers."
• Lack of Creditworthiness: Financial experts warned that most counties lack the robust revenue collection mechanisms necessary to service commercial loans, potentially forcing the national government into costly bailouts.
• Constitutional Constraints: Article 212 of the Kenyan Constitution mandates that county borrowing must be guaranteed by the national government, making independent borrowing legally and economically precarious.

Senators vehemently argued that allowing governors to borrow directly would be akin to writing a blank check to administrations that have yet to demonstrate basic fiduciary responsibility. "We cannot decentralize corruption and expect the economy to thrive," noted one ranking Senator during a heated plenary session.

The Treasury's Stance

The National Treasury strongly backed the Senate's resolution. Facing pressure from the International Monetary Fund (IMF) and the World Bank to consolidate national debt, the Treasury has adopted a hardline stance against any measures that could inflate public liabilities. Kenya's public debt currently stands at trillions of shillings, consuming a massive chunk of ordinary revenue just for debt servicing.

Treasury officials reiterated that any borrowing by devolved units must be strictly aligned with national macroeconomic objectives. They proposed alternative financing models, such as public-private partnerships (PPPs) and municipal bonds, provided these instruments are subjected to rigorous national oversight and Treasury approval.

Implications for Devolution

The Senate's rejection marks a significant setback for the devolution agenda. Governors have expressed profound frustration, claiming that the decision effectively infantilizes county governments and perpetuates a system of financial subjugation to Nairobi.

Despite the setback, the CoG has vowed to return to the drawing board to draft a revised framework that addresses the Senate's transparency concerns. "Devolution cannot be fully realized if we are treated like minor departments of the national government," stated a senior CoG representative.

"Financial independence requires absolute financial integrity; until the counties can balance their own checkbooks, the national vault remains securely locked," affirmed a Treasury insider, sealing the fate of the controversial proposal.