Bill seeks to curb Kenya's big appetite for borrowing

Unchecked borrowing by the government may soon be a thing of the past should Parliament approve a bill that will impose a debt ceiling for the country.

The bill by Emgwen MP Alex Kosgey seeks to put Sh6 trillion as the maximum amount of debt that government can have at any given time.

Currently the Public Finance Management Act gives Treasury leeway to set maximum ceiling to the national debt.

“The reason why I have put the ceiling in terms of actual figures and not a percentage is because we want wananchi to understand and internalise what we have here. A kid born today already owes Sh120,000,” he said.

Mr Kosgey said he has already presented the Public Finance Management (Amendment) Bill to the Speaker’s office for approval before it is taken up by the Budget Committee for scrutiny.

DEBT DEBATE

Over the last few years, Kenya has witnessed a sharp increase in the size of national debt, especially by the Jubilee government.

Kenya has the highest debt to GDP ratio in East Africa of 57 percent (in 2012 it was 40pc). Closely following is Burundi (55pc), Uganda (40pc); Rwanda (38pc) and Tanzania (39pc).

Sh6 trillion is in the region of 60 per cent of the GDP. Treasury has always argued that it can borrow up to 74 percent - which it terms as international best practices.

The respected international credit agency Moodys has projected that Kenya’s debt to GDP ratio will rise to 60 percent by 2019.

Kenya’s national debt presently stands at Sh5 trillion. The bill by Mr Kosgey is likely to kick-start the ballooning national debt debate and, aware of this, he called for more input from the public.

“Treasury, members of Parliament and the general public are free to suggest changes to the draft bill to either increase or reduce the amount at which the ceiling should be set. Further, the bill allows for the ceiling to be changed in future by Parliament should the need arise,” he said.

PARLIAMENTARY APPROVAL

The proposed bill also requires the government to submit to Parliament a clear repayment plan for each new loan they wish to take.

“The bill seeks to entrench the oversight role of Parliament in law by ensuring that the National Assembly pays attention to the revenue side of the budget and not just on the expenditure part ….it mandates the Cabinet Secretary in charge of the National Treasury to seek the approval of Parliament before effecting any borrowing of funds,” the bill reads in part.

In 2014, Parliament increased external borrowing ceiling from Sh1.3 trillion to Sh2.5 trillion, but in 2015 the PFM Act was amended and parliamentary oversight role was removed.

Since then Government has been increasing the national debt at will.

The high national debt has also forced the government to increase taxes on basic commodities as it struggles to collect enough money for both development and repayment of the loans it has accumulated.

SGR EXPANSION

On Saturday President Uhuru Kenyatta is expected to fly out to China where he will negotiate a further Sh380 billion loan for expansion of the Standard Gauge Railway line, further increasing the national debt.

There was reprieve however after Kenya appeared to reject a Sh300 billion loan from the United States for construction of Nairobi-Mombasa expressway.

Financial analysts have previously predicted that the national debt is unsustainable in the long term and government has already signalled the pinch of paying the debt by halting new projects.

In July, President Uhuru Kenyatta issued a directive freezing all new government projects until ongoing ones are completed.