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Counties tap Sh8.6bn bank loans in nine months
Controller of Budget Dr Margaret Nyakang'o when she appeared before the National Assembly Committee on Finance and National Planning at the Bunge Tower Nairobi on May 14, 2025.
County governments borrowed an additional Sh8.6 billion from commercial banks over the nine months to March 2025 to fund their operations amid a biting cash crunch due to delayed disbursement of funds by the National Treasury.
Data from the Central Bank of Kenya (CBK) shows that the borrowing pushed the cumulative debt stock of commercial bank loans to counties to Sh15 billion in March, up from Sh6.4 billion in June 2024.
A separate report by the Controller of Budget (CoB) Margaret Nyakang’o confirmed that the number of county governments relying on loans from commercial banks to cover recurrent expenditures such as salaries has quadrupled to eight, pointing to cash flow struggles in the devolved units amid delays in monthly disbursements.
Counties had to wait longer for money from the exchequer before reaching an agreement on the amount they were set to receive under the Division of Revenue Bill, 2024.
The reintroduction of the County Allocation of Revenue Bill and the Division of Revenue Bill after the withdrawal of the 2024 Finance Bill led to the freezing of county funding, triggering a cash crunch in the devolved units which hurt key areas such as workers' salaries.
The government was banking on the passage of the Finance Bill to raise Sh347 billion in the financial year 2024/2025.
"Funding to counties was not a problem of the exchequer as such as was largely a legal issue. There are legal experts who felt that we couldn't give the counties money unless Parliament passes the county revenue allocation bill and the division of revenue bill," Treasury Cabinet Secretary John Mbadi said in an earlier interview.
Data by the CoB shows that eight counties borrowed Sh3.96 billion during the first nine months of the current financial year, marking an over three-fold rise from the Sh914.3 million borrowed by two counties in a similar period the prior year.
Kisumu’s borrowings were the highest during the current reporting period at Sh1.68 billion, funds that were taken from the Kenya Commercial Bank (KCB) to “support operations and pay salaries”.
Other top borrowers included Bungoma which tapped a Sh556.13 million credit from the same lender, Kisii which took Sh521.73 million from Family Bank as well and Homa Bay which borrowed Sh488.93 from the Diamond Trust Bank (DTB).
Others were Makueni (Sh352.4 million), Laikipia (Sh250.6 million), Nairobi (Sh56.1 million), and Migori (Sh50 million).
This was in contrast to the nine months that ended in March 2024 when only Bungoma and Homa Bay borrowed Sh494.39 million and Sh419.94 million respectively in commercial loans to finance operations.
Though Kakamega and Nyandarua didn’t have recorded borrowings during the current review period, the COB indicated that the two have active memoranda of understanding (MOUs) with commercial institutions for lending when needs arise.
Dr Nyakang’o further indicates that Nairobi had an outstanding balance of Sh242.33 million advanced by Family Bank by the end of the last financial year, which was brought forward to put the dues owed to the lender at Sh298.43 million by the end of March 2025.
The Nairobi county government also has an overdraft facility with the Co-operative Bank of Kenya to pay for its personnel emoluments, averaging Sh1.6 billion per month.
“As of March 31, 2025, it (Nairobi) had an overdraft balance of Sh1.54 billion and had paid Sh43.14 million in bank charges and commissions for the same,” wrote Dr Nyakang’o in her report.
“In addition, the county has a long outstanding KCB loan of Sh4.5 billion (taken in 2010 during the defunct Nairobi City County) which is listed in the pending bills,” she added.
Counties had to wait longer for money from the exchequer before reaching an agreement on the amount they were set to receive under the Division of Revenue Bill, 2024.
The National Treasury wired Sh32.8 billion to counties in September, marking the first disbursement to the devolved units in the new financial year after clearing a legal hurdle that had frozen the release of funds.
