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LETTERS: Tackle county debt issues comprehensively

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City Hall in Nairobi. FILE PHOTO | NMG

City Hall’s move to go to court over debt issues is a more serious concern for city dwellers. We hope that the county government will have some of its requests granted, especially the lifting of warrants of arrests against officials.

But courts are not the solution to the creditors’ challenge. At Sh60 billion, the debts are unsustainably high. Even after the audit, findings will be that the debt is still a lot given that it’s not the first time its being addressed. Indeed as early as September 2013, the figure was Sh43 billion.

Various attempts have been made including having some written off by the national government and renegotiating repayment terms etc.

The county Medium Term Debt Management Strategy developed in 2016 enumerates these attempts. Thus wanting to verify the debts, while welcome, is nothing new. As the adage goes, the cure for debt is to pay.

The debts comprise statutory obligations, loans granted by financial institutions (some for periods before 2013), and supplier invoices for services provided.

Suppliers’ payments are more critical since they are for diverse, recurrent expenses like internet, power and garbage collection ie the things that make the county tick. They are services provided by companies who also incurred costs and have salaries, loans among other expenses to pay.

Delaying their payments really strains their cash flow. It also has negative consequences for the county. The suppliers can also refuse to provide services pending payments.

The recent halting of services at City Hall due to lack of internet and last year’s accumulation of garbage in the city illustrates the disruption that happens when suppliers halt services.

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The city also risks being labelled as a high credit risk client and thus denied services on credit. It might also suffer from high costs charged by suppliers who will put a premium on prices to factor in the delayed payments.

These and other factors point out the need to have a comprehensive strategy to deal with the debt challenge.

For starters, the county should avoid going to court. Its costly - legal expenses account for more than Sh3 billion of the total debts - and even the creditors can also got to court.

Instead, seek alternative solutions that will allow the county longer time to pay while not being penalised with higher prices and interests.

The county can do this by streamlining revenue collection to maximise cash inflows. Automation of services is a step in the right direction.

Minimising corruption at City Hall should be the governor’s main agenda as it determines the success of any other debt management strategy that will be put forth.

It will reduce kickbacks, patronage and other vices that currently bleed the county dry. A supplier who is assured that he will be paid after an agreed period regardless of whether he knows someone at City Hall will patiently wait and even give a discount.

Once they see genuine attempts to reduce revenue leakages and commitments to pay, banks and other creditors would also be agreeable to renegotiations on payment terms.

The process of debt payments can also be outsourced to qualified firms whose performance should be evaluated against the county set goals.

This will instil professionalism and discipline in debt repayment which will secure the creditors goodwill. It will also free the county to pursue revenue maximisation efforts and embark on renegotiations of loans and other liabilities.

All the while fulfilling its core mandate of improving the welfare of the city dwellers. Debt can paralyse a city’s operations as the city of Detroit found out when it was declared bankrupt in 2013. Countries like Greece have also felt the overwhelming weight of debt.

Kariuki Gathuitu, Nairobi