The National Treasury will advance loans to county governments in dire need of quick funds and have nothing in their coffers.
This will enable counties get it cheaper devoid of the current expensive loans and guarantees from local banks.
The National Treasury will in turn deduct the funds “agreeably” with the borrowers from their yearly county allocation.
This was ratified at a meeting of the Inter-Governmental Budget and Economic Council chaired by Deputy President William Ruto at his Karen residence, Nairobi.
Cabinet Secretary Henry Rotich said: “After discussion with the Central Bank of Kenya, we have found a mechanism to provide funds to counties upfront in the event there is an urgent need.
Rotich also announced that donors have given the government Sh5.5 billion for health transformation, agriculture and county facilities.
Ruto said using the National Treasury to issue the loans will make it easy for counties as they will not need guarantees.
“The Central Bank of Kenya is comfortable with the National Treasury issuing the loans because the National Treasury can guarantee itself,”he said.
The meeting brought together governors, county officials, Cabinet Secretaries, Permanent Secretaries, officials from the Commission of Revenue Allocation, Parliament and Controller of Budget.
Governors Wycliffe Oparanya (Kakamega), Sospeter Ojaamong (Busia), John Mruttu (Taita Taveta) and Joshua Irungu (Laikipia), Health Cabinet Secretary Cleopa Mailu and Controller of Budget Agnes Odhiambo attended the meeting.
The meeting also agreed to increase county roads fund from the current 15 per cent to 25 per cent. The funds, collected from fuel levy will be used to maintain county roads.
Rotich said the National treasury will also disburse Ksh. 1.4 Billion free maternity care funds to counties within a month. The service will in due course be administered by the National Hospital Insurance Fund, which will have representation from county governments. County representatives will also sit in the Kenya Medical Supplies Authority (KEMSA).
A further Sh2 billion has been allocated to vocational Training centers in counties.
The meeting also agreed to form a committee to evaluate county assets and liabilities.
Oparanya confirmed that the Integrated Financial Management Information system (IFMIS) was functioning properly.
Ruto, who is also the IBEC chairman said the Jubilee administration is committed to the success of devolution in the country despite the various challenges faced.
He said the government has continuously engaged the Council of Governors and other stakeholders in consultative meetings to overcome the challenges.
“We have managed to provide a firm foundation upon which devolution can succeed. We are very proud of the achievements we have made,” said Ruto.
The Deputy President said the government is working with county governments to resolve the issue of pension of County workers.