Senate Committee approves Treasury’s Ksh.9T debt ceiling ahead of Tuesday’s decisive vote
Senate’s joint Committee on Delegated Legislation and Finance has approved the National Assembly-seconded amendment to the Public Finance Management Act, 2012 which seeks to raise Treasury’s debt limit to an absolute Ksh.9 trillion.
In its final report to the lower House seen by Citizen Digital, the Committee has lobbied senators to appraise the ceiling highlighting the dire consequences on the Planning Ministry’s financial spend quest.
“If the senate was to shoot down the proposed regulations, a crisis would occur where the National Treasury would have to cancel all of these projects and do a drastic cutback of the budget that have been allocated already to the Judiciary, National Assembly, Executive and the Counties as there will be a huge deficit,” noted the report.
The Committee’s recommendation sides with that of Members of Parliament who stood by Treasury’s reconfigured debt management proposal.
Under the stewardship of Acting Cabinet Secretary Ukur Yatani, Treasury seeks to create room for more borrowing as a means to enable the restructuring of Kenya’s current debt profile by pushing government lending away from the domestic market and substituting expensive debt for cheaper options.
According to the National Treasury, the shift in focus will work to stamp out the State control of the domestic debt market allowing for greater private sector credit flow in a less crowded local lending environment.
Should Senators approve of the proposal, Kenya’s borrowing ceiling will shift from the current net present value (NPV) of 50 percent of Gross Domestic Product to an absolute value of Ksh.9 trillion.
Treasury estimates project Kenya’s public debt to cross the Ksh.6.3 trillion mark in June 2020 before settling at Ksh.8.7 trillion at the end of 2024.
While the estimates supports debt sustainability in the medium term, the proposal has received wider criticism from players in the greater fiscal management spectrum including the World Bank who see the move as a ploy to allow for excessive government borrowing.
Kenya’s excessive borrowing stretched in the last financial year by nearly three percentage points to GDP to lead to further debt-distress concerns on the back of a recorded fiscal consolidation slippage.
Public debt at the end of June stood at Ksh.5.89 trillion but has since moved right to breach the Ksh.6 trillion mark as at the end of September.
The National Treasury has already lined up loan agreements amounting to Ksh.421 billion in the funding of county projects in the current financial year including the Mombasa Gate Bridge and Konza City.
The approval of the project’s financing is however pegged on Senate’s approval of the revised debt ceiling.