MP Atandi wants commercial loans stopped for debt control

Alego Usonga lawmaker Samuel Atandi wants the acquisition of commercial loans such as the Eurobond declared illegal as they are too expensive to repay. 

The first-time member of parliament (MP) said this on Wednesday, in discussions concerning his Public Finance Management Act (Amendment) Bill.

STRICT MEASURES

The proposal seeks stringent measures to control the government’s appetite for borrowing, that saw the amount in loans rise to Sh5.4 trillion by June.

This is according to the annual national debt management report by the National Treasury, that presented figures as at June 30, 2017.

The report was tabled in the National Assembly by Majority Aden Duale (Garissa Town) two weeks ago.

“This bill seeks to mitigate the risk of uncontrolled borrowing. The government can explore increased use of long-term domestic debt instruments but ensure it does not crowd the domestic market and reduce access to credit by private sector players because of high interest rates," Mr Atandi says.

FINAL SAY

The National Assembly will have the final say on the procurement of loans by the executive if it passes the MP's bill.

Currently, parliament has no role in debt procurement as well as management as it is only tasked with putting a ceiling on how much the government should borrow compared to the Gross Domestic Product (GDP).

The National Treasury report predicts that the country’s public debt will hit Sh5.6 trillion by June next year and Sh7 trillion by June 2022 when president Uhuru Kenyatta will leave office after his second and final term.

Of the debts the country has incurred, Sh2.5 trillion is the domestic share and Sh2.6 trillion the foreign share.

Mr Atandi is of the view that the country is better off with multilateral and bilateral loans, which he said are relatively cheaper and have longer repayment periods.

“The accumulation of public debt without clear investment returns pauses the risk of debt distress since significant proportions of resources will be channelled to servicing maturing commitments both locally and internationally,” he noted.

UHURU'S POSITION

Amani National Congress leader Musalia Mudavadi has accused his Jubilee Party administration of being on a spree of incurring expensive commercial loans for grandiose projects with no immediate returns and extremely short grace repayment periods.

“The projects cannot repay themselves. It is a bad investment for the economy,” Mr Mudavadi said.

Mr Atandi warned the government that it should be cautious about the debts and consider pursuing low financing opportunities that will accelerate economic growth.

The government expenditure has been increasing over time, but revenues have lagged behind, resulting in the borrowing.

Last year, the revenue collection target fell short by Sh80 billion, thanks to the prolonged electioneering period.

This financial year, just days after the budget was read, the government slashed its Sh3.026 trillion budget by Sh37.6 billion because of foreign debt repayment commitments.