The government can now borrow more from the local market at the expense of micro, small and medium-sized enterprises (MSMEs) after Member of Parliament (MPs) adopted the 2022 Medium-Term Debt Management Strategy (MTDMS) yesterday.
The Budget and Appropriations Committee (BAC) approved a report by the National Treasury that allows the government to shift from previous borrowing strategies.
The MTDMS favours government borrowing from the domestic market over the external concessional loans to finance the Sh846 billion deficit in the Sh3.34 trillion budget for the 2022/23 financial year.
The adoption of the MDTMS will see the debt ceiling surpass the Sh9 trillion limit that was enacted by Parliament in November 2019.
BAC had refused to pass the deficit stating that the effect of approving the BPS would be an indirect breach of the ceiling and requested the Treasury to obtain an advisory from the Attorney-General’s office.
The committee proceeded to cap the Executive budget to Sh1.5 trillion, Sh38 billion on Parliament, Sh18.8 billion on the Judiciary and Sh370 billion in counties.
The Treasury had in the MDTMS 2021 said it will be tabling changes to the Public Finance Management law for approval by legislators to raise the cap on debt, without disclosing the fresh limit it is looking at.
In a chaotic session, Majority Leader Amos Kimunya marshalled his troops to overturn the BAC report which had imposed a Sh400 billion cap on new debt to avoid breaching the Sh9 trillion loan ceiling.
The MPs deleted the Sh400 billion cap and reinstated the Sh846 billion as contained in the BPS.
“The committee is concerned that the BPS had proposed an overall deficit of Sh846 billion, which if approved, has the potential to breach the approved debt ceiling of Sh9 trillion, the committee urges the National Treasury to amend the debt ceiling to enable them to implement the budget as proposed, rationalise expenditure or implement revenue-enhancing measures,” Kimunya’s amendment states.
The MPs approved Kimunya’s proposals asking the Treasury to amend the debt ceiling through acclamation.
MPs had asked the Treasury to increase the debt ceiling to allow it borrow Sh846 billion to plug the budget deficit in the next financial year.
The Treasury wants to spend Sh3.2 trillion with a budget deficit of Sh846 billion which would automatically breach the debt limits since Kenyan loans will hit Sh8.6 trillion in June.
The Treasury has introduced changes to the public finance management law moving from the loan limits from a fixed ceiling to 55 per cent of the gross domestic product but is short on timelines.
Budget papers show that Treasury tried to include the changes in a miscellaneous amendment bill through the Attorney General’s office to have the changes passed ‘promptly’ but the AG advised that the bill should be presented independently.
Treasury then tried to include the change in the Finance Bill but was again rebuffed since the money bill is only read in the National Assembly yet debt affects counties and would have to be passed through the senate.
“As demonstrated above, the National Treasury is committed to present the proposed amendments in Parliament for approval as soon as public consultations are finalised.
The National Treasury requests the National Assembly to approve the 2022 Budget Policy Statement and Medium Term debt strategy,” CS Ukur Yatani said in a letter to the Assembly dated February 8.