Laikipia becomes fourth county to earn credit ratings

Laikipia has become the fourth County to earn credit ratings as the devolved units continue to gear up for independent borrowing.

On Tuesday, the County earned a BB+ rating plus a stable outlook from the GCR credit ratings agency on its status as a long-term issuer of debt alongside a B rating on short-term issues.

The credit rating comes as the county prepares to approach the debt capital markets to raise Ksh.1.4 billion for development projects including industry parks and hospitals.

The stable outlook balances economic growth in the county and own source revenues against challenge which include a high wage bill and depressed spending on development expenditures and accounts payable position.

“Positive rating action could arise if the county receives an unqualified audit opinion, reduces its wage bill close to the recommended 35 per cent, improves its development budget utilization, meaningfully addresses its outstanding accounts payables and increases its own source revenue (OSR),” stated GCR.

“Conversely, negative rating action could arise if the above factors are reversed and if the unverified accounts payable become payable without commensurate resources to address the liability.”

Counties are empowered to borrow independently under provisions contained in the 2012 Public Finance Management (PFM) Act.

The National Treasury has however been slow to actualize the process as it assesses the risks posed on the exchequer which is set to be the guarantor of all county loans.

“More research should be done towards this field so as to establish the parameters that maybe used to measure the Counties that can be loaned and to avoid burdening the guaranteeing authority,” the National Treasury said its Budget Policy Statement (BPS) published last week.

The government has been running the County Creditworthiness Initiative (CCI) a collaboration between the Commission on Revenue Allocation (CRA) and the World Bank Group in a means to bridge the units creditworthiness gap and access market finance.

In March last year, the Counties of Kisumu, Bungoma and Makueni earned the country’s first County initial issuer ratings as part of the program which is expected to be rolled out to all 47 Counties.