NAIROBI, Kenya — County governments across Kenya are increasingly relying on commercial bank loans to keep operations running, with total borrowing rising sharply to Sh3.2 billion in the first quarter ending September 2025, amid persistent delays in disbursements from the National Treasury.
According to the latest report by Controller of Budget (CoB) Margaret Nyakang’o, the figure represents a significant jump from Sh1.8 billion recorded over the same period last year, underscoring mounting liquidity pressures at the devolved units at the start of the 2025/2026 financial year.
Nairobi County accounted for the largest share of the debt, owing commercial lenders Sh1.9 billion. Of this, the County Executive held Sh1.5 billion, while the County Assembly had outstanding obligations amounting to Sh316.7 million.
“The County Executive has a bank overdraft facility with the Co-operative Bank of Kenya Limited to cover its personnel emoluments, which average Sh1.6 billion per month,” Nyakang’o said in the report.
“As of September 30, 2025, it had an overdraft balance of Sh1.54 billion and had paid Sh68.38 million in the form of bank charges, commissions and penalties during the period under review.”
Machakos County ranked second with Sh544.3 million in outstanding borrowing by its executive arm, followed by Homa Bay at Sh471.5 million. Kisumu County Executive reported Sh289.1 million in loans, while Laikipia County Assembly posted the smallest debt at Sh24 million.
The CoB noted that most of the borrowing took the form of short-term overdraft facilities, largely used to pay staff salaries and meet urgent operational expenses. There was no significant uptake of long-term commercial loans, indicating that counties are using bank credit mainly as a stopgap measure to manage cash flow constraints.
A separate analysis by the Controller of Budget revealed that the number of counties resorting to bank loans to finance recurrent expenditure, including personnel emoluments, has quadrupled to eight, highlighting a growing structural challenge in county financing.
The borrowing trend has been building over the past year. Over the nine months to March 2025, county governments accumulated an additional Sh8.6 billion in commercial bank loans as they struggled with acute cash shortages caused by delayed Treasury disbursements.
Data from the Central Bank of Kenya (CBK) shows that this pushed total county debt owed to commercial banks to Sh15 billion by March 2025, up sharply from Sh6.4 billion in June 2024.
The cash crunch was exacerbated by uncertainty surrounding intergovernmental fiscal transfers following the withdrawal of the Finance Bill, 2024. The subsequent suspension of the Division of Revenue Bill and the County Allocation of Revenue Bill froze the flow of funds to counties, disrupting service delivery and, in some cases, delaying salary payments.
The national government had projected to raise Sh347 billion in the 2024/2025 financial year through the withdrawn Finance Bill, a gap that significantly strained both national and county finances.
