MPs raise debt ceiling to Sh2.5 trillion
What you need to know:
- MPs adopted a motion by Majority Leader Aden Duale that will allow the government to finance key infrastructure projects.
- The motion was passed despite opposition from a number of MPs, who questioned the timeliness of the increase.
Lawmakers on Tuesday approved a request by the Treasury to raise the maximum amount it can borrow from Sh1.2 trillion to Sh2.5 trillion.
MPs adopted a motion by National Assembly Majority Leader Aden Duale that will allow the government to finance key infrastructure projects.
Mr Duale told the House that the increase was informed by the need for funds to finance flagship projects.
The motion was passed despite opposition from a number of MPs, who questioned the timing of the increase. They also argued that the current debt was already high enough and a burden to taxpayers and it would be unfair to raise it further.
However, Mr Duale said the increase would not affect the country’s gross domestic product (GDP).
“The current debt per GDP is very favourable. Even if we raise our debt ceiling, every time the Treasury wants to borrow externally they have to come to this House for approval,” he said.
The government sought the House’s intervention through Sessional Paper 14 of 2014 that was tabled on November 18, 2014.
The House was divided and Speaker Justin Muturi was forced to call for an electronic vote to ascertain the winners. After the vote, supporters of the motion carried the day, with 79 votes for, 42 against and a single abstention.
WITHIN THE LAW
Treasury Cabinet Secretary Henry Rotich had in November told Parliament’s Finance, Trade and Planning Committee that the government had been assured of loans totalling more than $10 billion (Sh860 billion) over the next four years and increasing the debt ceiling would ensure the loans were within the law.
“If we approve a lower figure, we’ll have to come back and ask for more. So we thought, why not have enough until 2017?” Mr Rotich said.
The Cabinet secretary said the World Bank has committed to make $4 billion available to Kenya over the next four years; the African Development Bank $2 billion; and the European Union $4 billion.
This money would be used to fund the construction of a crude oil pipeline from Turkana to Lamu and a power transmission line from the coal power plant in Lamu to Kitui.
Others are the Galana-Kulalu and other irrigation schemes, the development of geothermal power and a power line through Kenya from Ethiopia to Tanzania.
He said domestic borrowing was not feasible.
EXTERNAL DEBT
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 African 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.
