Nairobi county government has started a fresh search for another bank to buy out its Sh4.2 billion loan owed to KCB #ticker:KCB.
The loan was borrowed from Equity Bank #ticker:EQTY by the defunct Nairobi City Council on March 30, 2011.
It was intended to help City Hall pay its staff pension and income tax.
The defunct government refinanced the loan with KCB over what it claimed were unfavourable conditions set by Equity, including a lending rate of 20 per cent and a 60-month repayment period.
KCB bought out the loan in April 2014, slashing the lending rate to 13 per cent, lengthening maturity of the debt to eight years and giving a six-month grace repayment period.
Under Article 212 of the Constitution, counties can only borrow if the national government approves the loan and if the County Assembly authorises it.
While moving a motion to authorise the intended refinancing, majority leader Abdi Guyo said there is need to ease repayments for the county’s ballooning debt, which stands at Sh57 billion.
Mr Guyo further expressed concern that the debts risk stalling delivery of crucial county services, if not addressed.
“It is important for the motion to be passed because the debt is just too big. With such debt levels, the county cannot engage itself in any meaningful projects,” Mr Guyo said on Thursday.
The motion follows a request on Tuesday by the county’s Finance and Economic Planning Committee to allow the government authorize to engage other lenders.
Members attributed the debt that has dragged on for years to lack of proper financial management within the executive in successive regimes.
Nairobi’s cash woes have seen its revenue collection drop since the 2014, with the assembly urging the executive to slash its budget for the 2018-19 financial year by Sh2 billion.
The allocation is Sh34 billion but the assembly raised concerns over low revenue collection amid conflicting reports over the 2016-17 year.
The county reported a collection of Sh10.1 billion while JamboPay, its e-payment service provider reported Sh9.86 billion raising questions over the un-accounted Sh240 million.