Counties told to diversify sources of funds

Wednesday, May 20th, 2020 00:00 |
Cash. Photo/File

Counties need to look elsewhere for development funds in the coming 2020/21 financial year, a study by Pan-African credit rating agency has said.

Agusto & Co Ltd has said county governments need to look towards other development funding options for the next financial year.

“The Covid-19 pandemic has upended Kenya’s outlook for 2020 with its attendant decline in the national government’s receipts from agricultural exports, foreign remittances and tourist activities owing to the plight of the virus,” the agency said. 

Agusto & Co said it expects a significant reduction in the total equitable share to Kenyan Counties (which is typically a percentage of national revenue) in the near to medium-term.

The company’s country manager Ikechukwu Iheagwam said the Kenyan government was contending with worsening debt service to revenue and budget deficit to gross domestic product ratios.

He believes that if counties are allowed to look for options elsewhere, they will ease the pressure which created by the pandemic.

“Counties must begin to access options for raising long term finance from domestic debt capital markets in the form of bonds or notes to fund infrastructural development projects, which would inevitably attract more investments and lead to higher internally, generate revenue if properly utilised,” he said.

Iheagwam said that theses sources of financing had been successfully used by many sub-national governments in Nigeria to secure long term funding (typically above seven years) in form of bonds for specific infrastructure developments.

 He said by pledging a portion of the monthly centrally distributed income (similar to the monthly equitable share transfer for counties) and a portion of the internally generated revenues (similar to local receipts from levies.

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