House team gives nod to Sh2.5trn bid

A parliamentary committee has asked the House to approve the Treasury’s request to be given the greenlight to borrow up to Sh2.5 trillion from foreign sources, more than double the current limit of Sh1.2 trillion.

The Finance, Trade and Planning Committee said in a report tabled in the National Assembly that it was convinced that the government needs the debt ceiling increased.

If the larger House agrees with the committee, Treasury will have the leeway to borrow up to Sh2.5 trillion.

It noted that the request to raise the debt ceiling is the result of the increased requirement to fund major infrastructure projects in the remainder of the Medium Term II, which is from 2013 to 2017.

“The committee… was convinced that the review of the external debt ceiling was essential to help the government achieve its developmental objectives especially to enhance the delivery of crucial infrastructure projects,” the committee said.

The MPs on the team reported that they were convinced the ratio of Gross Domestic Product to Debt is favourable.

“Moreover, despite the setting of the external debt ceiling, the mandate of approving specific external borrowing amounts and plans every financial year is vested in the National Assembly though the annual Budget,” it added.

This is aimed at assuring the MPs that even if they approve the increase of the debt ceiling, the decision on whether to do the actual borrowing will have to come from them too.

STANDARD GAUGE RAILWAY
It said that from the presentation by Treasury Cabinet Secretary, the projects will cost Sh5.762 trillion over the coming three years. Among these are: the standard gauge railway, the Lamu South Sudan Ethiopia Transport corridor, the generation of 5,000 MW of power, the Galana irrigation projects, 10,000 kilometres of roads and expansion and modernisation of ports.

Treasury was, however, asked to ensure the total public debt is within reasonable and sustainable limits and is consistent with the East African Community Monetary Union convergence criteria.

The Executive is eager to have the proposal, submitted via Sessional Paper 14, approved before the House starts its lengthy Christmas break in December.

Kenya’s total external debt stock stands at Sh1.045 trillion.

Some Sh688.022 billion is owed to multilateral lenders; the International Development Agency; the Africa Development Bank; and the International Monetary Fund.

Bilateral lenders such as Japan, France and China are owed Sh278.547 billion while commercial banks are owed Sh185.163 billion.

Apart from that, the government has also accumulated a domestic debt of Sh1.26 trillion, meaning that as of September 30, overall public debt was at Sh2.305 trillion.