Treasury seeks to fix Kenya’s debt problem with new borrowing cap

The National Treasury has set out on placing an absolute figure on Kenya’s debt accumulation with a view to better the transparency on public debt management.

In a public notice issued on Thursday, Acting Treasury Cabinet Secretary Ukur Yatani said the expression of debt in absolute figures would help strengthen the fiscal management framework as outlined under the Public Finance Management Act of 2012.

“The debt limit allows Kenya to continue assessing concessional funding from multi-lateral and bi-lateral agencies to finance development programs for inclusive economic growth and development,” he said.

The proposed debt ceiling currently sits under the consideration of Parliament with Emgwen Member of Parliament Alexander Kosgey having first proposed the new cap at Ksh.6 trillion.

Ironically, both the National Assembly and Parliament have been responsible for the breach of the already existing ceiling on public debt which is set out a 50 percent of Gross Domestic Product (GDP) by failing on their fiscal oversight role.

The transgression by the pair hence casts doubt on the viability of Treasury’s fresh interlude on public debt management even as Kenya already lies among debt distressed countries on the continent.

Surprisingly, the members of parliament have taunted themselves to better manage their oversight role this time round as they too eye changes to the PFM provisions.

“An Act of parliament is always better as it comes from an inclusive process which includes elements such as public participation as opposed to regulations simply drafted by a Cabinet Secretary,” Chairman to the Budget and Appropriations Committee Kimani Ichungwa told Citizen Digital in an April interview.

According to a profiling of the continent’s debt by the African Development Bank (AfDB), Kenya lies right at the center of the distress where only 16 countries have debt levels below 40 percent of GDP.

While experts largely laud the adjustment by Treasury, Eco Bank’s Head of Research George Bodo worries the shift lacks clarity on future adjustments to fiscal policy.

“The recommendation by Treasury is a bit ambiguous as it fails to establish whether we are setting a moving figure. The ceiling should be set on a moving target set on the fiscal stance on each financial year,” he said.

Presently, Kenya’s public debt as of June sits at Ksh.5.8 trillion or an equivalent 65.2 percent of GDP as per the analysis of provisional 2018 economic insights by the Kenya National Bureau of Statistics (KNBS) and the National Treasury.

External debt accounts for a share of Ksh.3.02 trillion ($29.6 billion) which the remaining sum total of Ksh.2.8 trillion sits in local currency denominated domestic borrowings.

Treasury’s targeted squeeze on borrowing aligns to the re-setting of the country’s fiscal management by the Planning Ministry.