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Kisumu’s OSR growth has been erratic over the last 5 years with collections consistently falling below target (FY18/19: 61.0%, FY17/18: 76.2%), albeit with some improvement in FY20/21. The County is reliant on Exchequer releases with the OSR to Total revenue at 11.4% in FY18/19 and 7.9% in FY19/20. Although the average over the last 5 years is slightly above the national average of 8.7%, it compares poorly to other urban centres (Nairobi: 47.1%, Mombasa: 27.5%, Nakuru: 14.5%, Kiambu: 19.8%). Property rates offer significant potential to enhance OSR but remain hampered by an un-updated valuation roll and uncollected arrears of about KES9bn.
The Stable Outlook reflects the view that the rating reflects the weaknesses in Kisumu’s operating performance and financial position. However, this could be amended if there is further deterioration. Positive rating action could arise if the County has sustainable increases in OSR, reduces its consumptive expenditure, particularly the high staff costs and improves its development budget implementation, audit outcomes and liquidity profile especially through addressing the pending bills.