Treasury asks House to raise borrowing limit to Sh1.2trn
What you need to know:
- Demand is deemed necessary in order to enable Kenya seek external funding for building of the Lamu port project
The Treasury is seeking Parliament’s approval to increase the country’s external borrowing limit on anticipation that any new loans will breach the current ceiling.
In a motion tabled before Parliament, Finance Minister Njeru Githae wants the House to grant the authority to increase the limit to Sh1.2 trillion from the current Sh800 billion.
This, according to those in the know, is also in part fulfilling International Monetary Fund condition if the government is to seek external funding for the construction of the Sh1.2 trillion Lamu Port and Southern Sudan-Ethiopia Transport (LAPSSET) project.
Lappset is a key flagship investment identified in the Vision 2030, to link Lamu to Ethiopia and newly-independent south Sudan with a road, rail and oil pipeline.
“That, pursuant to Section 50(2) of the Public Finance Management Act, 2012, this House approves the increase of total indebtedness for the time being outstanding in respect of principal amount of money borrowed or credit obtained from US$9.3 billion (Sh800 billion) to US$14 billion (Sh1.2 trillion),” the motion reads in part.
As at June 2012, Kenya’s external debt was Sh774 billion. The Treasury hopes to have the motion adopted before the Parliament is dissolved on January 4 next year.
Failure by the Parliament to pass the Bill will put on hold the development of the Lappset project as external investors will shy away from giving the government money for failing to comply with IMF standards.
Though the project is also being financed by Ethiopia and South Sudan, but Kenya as the anchor state must first guarantee all financing by external lenders before Ethiopia and South Sudan come in.
The Treasury is seeking external borrowing ceiling upward revision on projections that the economy will grow at 5.2 per cent next year which will tentatively increase Kenya’s GDP to over Sh4.2 trillion.
Increase in external debt
This will then allow it to increase the external debt to GDP ratio to almost 30 per cent, thus allowing the government room to guarantee more debt.
The International Monetary Fund has in the past raised the red flag over Kenya’s public debt which stands at over Sh1.4 trillion — accounting for over 47 per cent of the GDP, urging that the debt should be reduced.
