The National Treasury is pushing with changes to the public finance law to allow it to exceed the borrowing limit provided it informs Parliament.
Treasury is inviting public consultations on new proposals aimed at managing public debt in the country, key among them is capping of public debt at 55 per cent of gross domestic product (GDP) rather than the current ceiling of Sh9 trillion.
In proposed changes to the Public Finance Management Act, Cabinet Secretary Ukur Yatani said the Treasury shall at times maintain public debt at a level not exceeding 55 per cent of the gross domestic product.
“Provided that if any time, the public debt exceeds the limit set under the Act and these Regulations, the Cabinet Secretary shall provide to Parliament a written explanation on the said circumstances leading to the reach of the limit and provide a time-bound remedial plan,” he said Yatani in the proposed regulations.
This, the Treasury, said was to conform with the international best practice in setting debt limits (setting debt limits on the basis of payment capacity.
Treasury has introduced changes to the public finance management law moving loan limits from a fixed ceiling to 55 per cent of the gross domestic product but is battling with short timelines.
It 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 Financial 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.
Last week, Member of Parliament (MPs) adopted the 2022 Medium-Term Debt Management Strategy (MTDMS) allowing government to borrow more from the local market at the expense of micro, small and medium-sized enterprises (MSMEs).
The Budget and Appropriations Committee (BAC) approved a report by the 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.
