County governments borrowed an extra Sh8.6 billion from commercial banks in the nine months to March 2025 to keep operations running, highlighting growing financial pressure caused by prolonged delays in disbursements from the National Treasury.

Data from the Central Bank of Kenya (CBK) shows that the new loans pushed the total amount owed by counties to banks to Sh15 billion in March, rising sharply from Sh6.4 billion in June 2024.

A separate report by the Controller of Budget (CoB), Margaret Nyakang’o, confirmed that the number of counties turning to bank loans to cover recurrent expenses like salaries has increased to eight, up from two, showing how severe the cash crunch has become.

The delays in county disbursements were triggered by the withdrawal of the 2024 Finance Bill, which forced the reintroduction of both the Division of Revenue Bill and the County Allocation of Revenue Bill.

This stalled the release of county funds and left devolved units struggling to pay workers and support daily operations.

The government had been banking on the Finance Bill to raise Sh347 billion in the 2024/2025 financial year. However, the legal gaps that emerged after the bill was withdrawn meant counties had to wait until new laws were passed before receiving their share of funds.

"Funding to counties was not a problem of the exchequer as such as was largely a legal issue.

There are legal experts who felt that we couldn't give the counties money unless Parliament passes the county revenue allocation bill and the division of revenue bill," Treasury Cabinet Secretary John Mbadi said in an earlier interview.

Data by the CoB shows that eight counties borrowed Sh3.96 billion during the first nine months of the financial year, marking a sharp increase from the Sh914.3 million borrowed by just two counties over a similar period the year before.

Counties were forced to wait longer for exchequer funds due to legal delays, forcing many to seek alternative financing to avoid shutting down essential services.

The loans were mainly used to cover recurrent costs like paying salaries.

The CBK data and CoB reports offer a clear picture of the deepening financial struggles that have pushed counties to take on more commercial debt, even as legal challenges around public finance management continue to affect the flow of funds from the national government.