Senators block Governors’ bid for independent borrowing

Governors have suffered a major setback in their push to borrow independently from financial markets, as does the national government, without the oversight of the National Treasury.

Senators rejected a request by county bosses, arguing that direct borrowing could expose counties to reckless debt accumulation.

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Counties face pending bills exceeding Sh150 billion, as well as unpaid overdrafts with commercial banks running into millions of shillings.

Last week, Council of Governors Vice chairman Muthomi Njuki and CoG Finance Committee chairman Fernandes Barasa appeared before the Senate Finance and Budget Committee to argue their case for independent borrowing.

“The council proposes the Senate initiates establishment of a threshold for county governments’ borrowing entitlements pursuant to Section 50(5) of the Public Finance Management (PFM) Act,” Njuki and Barasa told the committee.

Currently, counties cannot borrow directly from lenders without the Treasury acting as guarantor.

The PFM Act mandates the national government to guarantee and manage borrowing for state entities, including counties, to ensure fiscal prudence.

Section 50(1) requires the government to meet financing needs at the lowest market cost while keeping public debt sustainable.

Further, Section 50(5) allows Parliament to set borrowing thresholds for both national and county governments.

Barasa argued that counties should be allowed more autonomy under strict guidelines.

“The CoG proposes that the Senate invokes section 50(2c) of the PFM Act to explain measures being taken to ensure thresholds are met and that high debt stress risks are managed within the medium term,” he said.

However, the committee, chaired by Mandera Senator Ali Roba, immediately rejected the proposal.

The lawmakers warned that direct borrowing could unleash a wave of financial mismanagement.

“Very few governors have the instruments or ability to borrow responsibly in international markets,” Migori Senator Eddy Oketch said.

“Opening this window could be disastrous,” he said.

Senator Roba echoed concerns over “immaturity” in county financial management. “We have cases where successive governors abandon projects or reject pending bills left by their predecessors,” he said.

“What happens if we allow counties to borrow directly? Debts may be abandoned, creating messy and costly outcomes. It would be a ticking time bomb,” he warned.

Despite the rejection, Njuki tried to persuade senators, insisting that counties would act responsibly.

“If we borrowed, it would be our responsibility to pay. We would work overtime to meet the obligations,” he said, urging lawmakers not to discriminate against counties.

Currently, most counties rely on commercial bank overdrafts to cover urgent operations, including salaries, when exchequer releases are delayed.

Direct access to loans, Njuki argued, would allow counties to plan and execute development projects more efficiently without constant Treasury intervention.

However, senators remained firm that loosening borrowing rules could expose counties — and the national economy — to unnecessary risk.

They stressed that without proper capacity and financial discipline, direct access to international loans could lead to unsustainable debt levels, project abandonment, and long-term fiscal instability.

Instant analysis

Standoff underscores ongoing tension between counties seeking financial autonomy and national lawmakers prioritising oversight and fiscal prudence. Governors say borrowing independence will accelerate development but senators say current safeguards essential to protect public resources. For now, counties will continue to rely on Treasury-backed borrowing and short-term overdrafts, keeping ultimate fiscal control at the national level. County leaders pledge to push for greater autonomy in parliamentary sessions.