Nairobi governor Evans Kidero. The county inherited debts running into billions of shillings. Photo/FILE
What you need to know:
Nairobi County to spend 20pc of its revenue to repay some loans.
Debt inherited from the defunct Nairobi City Council (NCC) is weighing down the county government, making it difficult to provide services to residents.
The county says it will spend Sh3 billion or 20 per cent of internal revenues from parking fees, land rates and business permits to repay loans in the year to June 2015.
The disclosure is contained in the county’s Fiscal Strategy Paper (FSP) for the financial year 2014/15, which projects Nairobi’s total revenues to stand at Sh26.3 billion including an allocation from the central government of Sh11.1 billion.
Total debt owed by the county of Nairobi stood at Sh43.99 billion as at the end of August, according to data from City Hall. Government agencies, on the other hand have not paid the Nairobi City County debt amounting to Sh47.5 billion.
The city’s woes are compounded by a Sh5 billion loan from Equity Bank that the NCC borrowed. KCB was to buy out the Sh5 billion loan.
City Hall reckons that debt payments have emerged as risk to the county’s quest to meet its development agenda.
It wants to renegotiate the terms of some of the loans, especially the one borrowed from Equity Bank, to ease the repayment burden.
The Equity loan was pegged on the Central Bank Rate and saw the interest repayments soar as the bank’s lending rate rose from the initial 10 per cent.
“This (rate) kept changing. So we went from 10 to 12 to 15 per cent. At one time we were at a high of 27 per cent. Right now the rate is at 18 per cent,” said a county treasury official Stephen Osiro.
The loan costs account 38.4 per cent of the Sh7.8 billion the county plans to set aside for development.
The chief accountant at the county treasury Luke Gatimu reckons that the terms of the loans are not favourable.
“If we were in position to renegotiate the loan, it would be good to have a cap. It could be floating, but be capped at Treasury Bill rates,” Mr Gatimu told the county’s assembly committee last week.
The county government owes Sh5.5 billion to its statutory creditors with Local Authorities Pension Trust (Laptrust) and Local Authorities Pension Fund (Lapfund) accounting for Sh4.2 billion, according to figures tabled in Parliament in August.
The city government has not settled pay-as-you-earn (PAYE) contributions of Sh614.4 million to the Kenya Revenue Authority (KRA), Sh674.4 million employees’ contributions to the National Social Security Fund (NSSF) and Sh3.5 million to the National Hospital Insurance Fund (NHIF).
The county is also facing difficulties settling litigation fees which stood at Sh1.2 billion by in July and is also due to settle retired and deceased staff benefits totalling Sh85.9 million.
Contingent liabilities to KRA, NSSF, Laptrust, Local Authorities Service Delivery Action Plan (Lasdap) ongoing projects, litigations, government guaranteed loans, local government guaranteed loans and on-lent water (foreign loans) all total Sh27.2 billion.
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Note: The results are not exact but very close to the actual.
