County governments across Kenya are increasingly relying on commercial bank borrowing to stay afloat, with short-term debt rising sharply to Ksh3.2 billion in the first quarter ending September 2025.
The latest figures represent a significant jump from Ksh1.8 billion recorded during the same period last year, underscoring growing liquidity pressures driven largely by delayed disbursements from the National Treasury.
Nairobi County emerged as the most indebted, owing banks Ksh1.9 billion. According to Controller of Budget Margaret Nyakang’o, the County Executive accounts for Ksh1.5 billion, while the County Assembly has outstanding obligations amounting to Sh316.7 million.
Nyakang’o noted that Nairobi County operates a bank overdraft facility with the Co-operative Bank of Kenya to meet personnel costs, which average Ksh1.6 billion monthly. As at September 30, 2025, the county had an overdraft balance of Sh1.54 billion and had paid Ksh68.38 million in bank charges, commissions and penalties during the review period.
Machakos County followed with Ksh544.3 million owed by its executive, while Homa Bay reported Ksh471.5 million. Kisumu County Executive recorded outstanding loans of Sh289.1 million, with Laikipia County Assembly posting the lowest debt at Ksh24 million.
Most of the borrowing took the form of overdraft facilities, largely used to pay salaries and meet urgent operational expenses. The Controller of Budget report indicates minimal long-term borrowing, with short-term bank financing accounting for the bulk of county debt.
Over the nine months to March 2025, counties accumulated an additional Sh8.6 billion in commercial bank loans, pushing total county bank debt to Ksh15 billion, up from Ksh6.4 billion in June 2024, according to the Central Bank of Kenya.
The cash crunch was worsened by delays in passing the Division of Revenue Bill and the County Allocation of Revenue Bill, following the withdrawal of the 2024 Finance Bill—freezing county funding and disrupting essential services, particularly salary payments.
