World Bank cautions counties on funds

World Bank financial experts have warned counties against heavy borrowing to fund operational budgets, saying it could drive them to insolvency and plunge the country into economic trouble. They said borrowing poses risks for counties that already have huge recurrent expenditures without adequate resources to offset monetary deficits. ‘This happened recently in Detroit, United States, where the city borrowed externally to fund infrastructural development in the hope of attracting vehicle manufacturers. But the investors refused to come in even with improved infrastructure, thereby sending the city into bankruptcy as it couldn’t repay its creditors,’ World Bank director for macroeconomics and fiscal management Marcelo Giugale said during a national conference on managing sub-national borrowing in Kenya. World Bank country director Diarietou Gaye said counties only need to borrow to fund capital expenditure on projects which are critical for development, saying that external borrowing laws need to be enshrined in the constitution to make it easy for the development partners to provide funds, according to the-star.co.ke