- The law provides a debt ceiling of 50 per cent of Kenya’s GDP (about Sh9.5 trillion).
- Icpak’s Public Accounts Committee chairman Erustus Kwaka said amending the law as suggested by Treasury will cause debt distress.
Kenya is facing a debt crisis but government officials don’t seem to know what to do about it. The obvious route is to borrow some more to pay old debts and finance the budget.
An admission by the National Treasury that the government is broke and may be unable to finance this year’s Sh3.02 trillion budget if Senate rejects an increase in the debt ceiling to Sh9 trillion exposed the sad truth.
Experts have raised the red flag that the country cannot take up more debt but from acting National Treasury Cabinet Secretary Ukur Yattani’s admission, we could be too deep in the hole that more debt is what will save us.
The Transport Cabinet Secretary James Macharia has already announced that the Cabinet had suspended the Mombasa-Nairobi project for at least two years to allow the country’s debt levels to drop, while also prioritising other important projects. Earlier, United States Ambassador to Kenya Kyle Carter had said that the onus was on Kenya to sort the debt issue and that the US government was fully committed to support the building of the expressway.
The issue of debt also emerged during a meeting of the Senate Committees on Delegated Legislation and Finance and Budget and the Institute of Certified Public Accountants of Kenya (Icpak) at the Kenyatta International Convention Centre - and the government has been pushing for an amendment to raise the debt ceiling to Sh9 trillion to allow the country undertake more projects and take more loans.
“If we are not guaranteed this amendment, there will be a crisis in the country because we will not be able to implement this year’s budget. We will also be unable to do debt restructuring to retire some of the old and expensive commercial loans with interest rates of up to 9.5 per cent that are chocking our economy,” Mr Yattani said.
Initially, the Treasury thought it had already had its way on October 9, when the National Assembly approved the amendments to Public Finance Management (PFM) (National Government) Regulations seeking to raise the debt ceiling to Sh9 trillion from the current Sh6.09 trillion, surpassing the Sh5.8 trillion as of June, according to latest data from Central Bank of Kenya (CBK).
However, it took the intervention of the Office of the Attorney-General to remind Treasury mandarins led by the CS that it also needed the input of the Senate to amend the regulations.
According to the Statutory Instruments Act of 2013, regulations brought to Parliament for consideration by relevant government agencies cannot be amended, they can only be approved or rejected.
Initially, the Senate had proposed a ceiling of Sh7.5 trillion but withdrew after learning it was headed nowhere because of the exigencies of the law.
This means that if the Senate rejects the PFM regulations, they will be lost, meaning that the previous effort by the National Assembly in approving them will amount to naught.