Ruto's unfulfilled debt promise pushes Meru County to the brink

A roadside declaration by President William Ruto to help the Meru County Government pay Sh640 million owed to a French investor has come back to haunt the devolved unit.

This follows National Treasury Cabinet Secretary John Mbadi’s plea to the Senate to approve the withholding of 50 per cent of funds allocated to Meru County for failing to honour the pending bill that has accrued over several years—a move that senators opposed.

President Ruto, in May 2025 during an event at Meru National Park, declared that the national government would settle a Sh700 million debt. However, despite the presidential directive, the National Treasury has not settled it.

Instead, citing the county's failure to pay the now-ballooned “arbitral award,” the National Treasury halted the transfer of up to 50 per cent of Meru’s equitable share in April 2026, plunging the county into a cash crisis.

The county is now unable to pay staff on time or remit statutory deductions, with pending bills ballooning to more than Sh1.3 billion owed to local suppliers, contractors, and Kenya Medical Supplies Authority (KEMSA).

Appearing before the Senate Finance and Budget Committee, Meru Governor Isaac Mutuma said that President Ruto had publicly committed in May 2025 to have the national government settle the Sh700 million debt but has not honoured the promise.

“We humbly request the National Treasury to suspend the proposed stoppage, as it will greatly affect the Meru County Government’s operations, its ability to deliver essential services, and the implementation of development plans for the Financial Year 2025/2026,” said Mutuma.

The governor called on the National Treasury to allow the conclusion of the proposed takeover by the Ministry of Trade and Industry and the budgeting of the decretal amount after consultation with the County Assembly.

The Ministry of Trade and Industry took up the matter but also failed to clear the debt because the promise—announced as a waiver or settlement by President Ruto—was never formally incorporated into the national budget or actual disbursement.

Mutuma told the Senate Committee that the original arbitration award of Sh339 million has nearly tripled due to a 14 per cent annual interest rate, reaching over Sh800 million. He reiterated the call to suspend the proposed stoppage, citing serious challenges to operations and the delivery of essential services.

The governor further argued that punishing the current administration for a “rot” inherited from the 2013–2017 regime—when the investor, French national Michel Dechauffour, was evicted—is unjust to the residents of Meru County.

The Meru County Government is also under pressure from Leopard Rock Limited’s lawyers following a notice of stoppage of transfer of funds to the devolved unit, pursuant to Section 96 of the Public Finance Management Act, for a serious material breach arising from the non-payment of the arbitral award.

“We understand that the Senate is inquiring into the decision of the National Treasury to stop the transfer of funds to the County Government of Meru for failure to pay our client the decretal sum, which now stands at more than Sh470 million,” reads a letter from Manyonge Wanyama and Associates.

The matter stems from lease agreements entered into between Leopard Rock Mico Limited and the Nyambene County Council—the predecessor in title to the County Government of Meru—in 1997.

The lease was subsequently superseded by a fresh agreement dated October 30, 2008, which revised the monthly rent to Sh60,000, subject to a 10 per cent increment every two years, and increased the daily bed occupancy contribution to 10 per cent of total collections, payable monthly in arrears.

However, in July 2018, the Meru County Government purported to terminate the lease on the grounds that certain building plans had not received the requisite approvals. The company disputed this and, in accordance with the arbitration clause in the lease agreement, referred the matter to arbitration.

Following the arbitration proceedings, an arbitral award of Sh339,070,485 was issued on December 19, 2019, in favour of Leopard Rock Mico Limited.

According to the Controller of Budget (CoB), the stoppage of fund transfers to a county government carries inherent risks to service delivery in areas of recurrent expenditure such as health services, education support, agricultural extension, and public works.

“The CoB urges both the National Treasury and the County Government to ensure that the remaining 50 per cent of the funds transferred is channelled towards protecting essential services for the residents of Meru County throughout the duration of the stoppage,” said Deputy CoB Stephen Masha.

The Treasury Cabinet Secretary invoked Article 225 of the Constitution to justify the freeze, citing the county's “persistent material breach” in failing to pay the debt.

The governor warned senators that the fund freeze has paralysed Meru County, leaving it unable to pay staff salaries, remit statutory deductions, or settle Sh1.3 billion in other pending bills owed to local suppliers.

Boni Khalwale asked the National Treasury and the Controller of Budget to put their house in order, noting that the Meru County Government had already paid Sh200 million of the amount owed to the investor, and that it would be unfair to punish the county further.

“The National Treasury should not pretend they are not aware there was an interim court order stopping the County Government of Meru for five years. Why should they punish the residents of Meru for something that is not of their own making?” said Khalwale.

Meru Senator Kathuri Murungi said that the National Treasury and the Controller of Budget should have engaged the Meru County Government to establish the status of the matter before issuing the directive to stop the allocation of funds.

Nominated Senator Tabitha Mutinda questioned why, out of the 47 counties with more than Sh180 billion in pending bills yet to be cleared, the National Treasury had singled out Meru, focusing on what was owed to a single foreign investor.