Kenyan legislators are looking to review and approve a new public debt cap for borrowing as requested by the country’s National Treasury (Kenya’s Finance Ministry).
Presently, the debt cap for borrowing has been set at Sh9 trillion ($81,989,613,900) by the country’s Parliament.
Speaking on the Treasury’s request for an increase in its borrowing capacity, Leader of the Majority Caucus in Parliament, Amos Kimunya, noted the National Treasury’s request will be examined and approved if seen to have merits.
“We don’t want debt to rise but Kenyans want development. We will look at the Treasury’s proposals and if it is for raising money for development, then we have no problem even if they want the ceiling set at Sh20 trillion ($182 billion),” Mr Kimunya said.
“We will look at the merit and demerits on what the budget needs to adhere and not the limit or ceiling. Japan has taken huge debts to develop, and so long as the loan is directed to development, there is nothing wrong with borrowing up to even 60 per cent of our GDP,” Mr Kimunya added.
The National Treasury’s demand for a raise in the debt cap is to accommodate gaps in its expenditure needs amid underperforming tax collections.
The Treasury disclosed in its Medium Term Debt Management Strategy 2021, that it will be tabling changes to the Public Finance Management law for approval by legislators in the near future to raise the cap on debt, without disclosing the fresh limit it was looking at.
In 2019, Kenya’s Parliament raised the statutory debt cap from Sh6 trillion ($54.6 billion) to the current sh9 trillion ($82 billion) to accommodate growing borrowing due to gaping budget deficits and investments in infrastructure projects like roads.
“The formulation of this strategy has been on a background of public debt stock fast approaching the statutory ceiling of Sh9 trillion set out in the Public Finance Management Act, 2012.” .
“As a result, the implementation of this strategy may require the revision of the debt ceiling through the amendment of the PFM Act based on future borrowing requirements,” Treasury officials wrote in the debt strategy paper for the next three years.
Kenya’s public debt crossed Sh7.28 trillion ($66.3 billion) last December, an equivalent of 65.6 per cent of gross domestic product (GDP), from Sh6.01 trillion ($54.7 billion) or 58.0 per cent of GDP a year earlier, Treasury data shows.
The National Treasury earlier projected total public debt will hit Sh7.66 trillion ($69.8 billion) by end of the current financial year in June from Sh6.69 trillion ($60.9 billion) a year earlier, but rise to Sh8.59 trillion in June 2022 and Sh9.37 trillion by mid 2023.
