IMF chief rules out direct funding deals with counties

The International Monetary Fund has ruled out any direct funding engagement to the county governments, saying that all their requests should be channeled through the Treasury.

IMF managing director Christine Lagarde noted that despite of the county governments being allowed by the constitution to engage donors directly, the Fund by statute deals only with member national governments.

She was addressing the Parliamentary Budget and Appropriations Committee, the Finance, Planning and Trade Committee and the Senate Committee on Finance, Commerce and Economic Affairs at County Hall on Tuesday.

Ms Lagarde was responding to statements by Kakamega Senator Bonny Khalwale and Kimilili MP Chris Wamalwa, who said that the access to direct funding from the international lender could act as a shield against moves by the central government to frustrate devolution.

Mr Khalwale said that there are no legal instruments to guide how a county government can engage with donors, save for a line in the constitution that gives authority to do so.

“If you deal directly with the national treasury, the fear is that once your support is released, that support is not immediately released to the county governments,” said Mr Khalwale.

Mr Wamalwa asked whether the IMF would consider changing its statutes to accommodate engagement with devolved units. The constitution allows the devolved units to borrow but they must receive guarantees and approval from the National Treasury.

“The articles of the IMF provide that we deal with the 188 members who are represented by their national governments. We have no relationship with devolved authorities, but rather we deal with the national governments,” said Ms Lagarde.

“Those are the by-laws. Amendment would require approval of a 75 per cent majority of the 188 members, and I don’t see that in the near future.”

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Instead, the IMF chief called on county governments to engage with the Treasury and ensure that their requirements are part of the agenda when the central government holds its annual meetings with IMF team.

Speaking at a meeting with the Kenya Private Sector Alliance on Monday, she cautioned on the need to keep the financial costs of devolution in check, with spending kept in a transparent way.

She told the parliamentary committees that there remains a risk of devolved government units expanding their spending at the same time the central government tries to rein in public spending, hence negating fiscal austerity measures.

“Control of fiscal discipline by parliamentary committees will have to be rigorous,” said Ms Lagarde.