MPs raise country’s debt limit to hefty Sh9trn

Wednesday October 09 2019

Acting Treasury CS Cabinet Secretary Ukur Yattani. The Treasury proposed amendment of Public Finance Management Regulations. PHOTO | FILE | NATION MEDIA GROUP


The National Assembly Wednesday voted to increase Kenya’s debt ceiling to a whopping Sh9 trillion, putting the country at the risk of being mortgaged.

This is despite opposition from the civil society and the donor community on the sustainability of the increasing debt burden against a not-so-well growing economy.

Only two MPs, Patrick Musimba (Kibwezi East) and Mohamud Mohamed (Wajir South) opposed the ceiling, saying, it was overburdening Kenyans, but their protestations went unheeded as they were out-muscled.


“This country requires to be salvaged from loans,” Mr Mohamed said even as he dismissed Kenya’s comparison to major powers like Japan in terms of debt levels.

“Japan is not Kenya and Kenya is not Japan, which is backed up by industrialisation and borrows from itself,” the MP said.


Previously, the debt ceiling has been pegged at 50 per cent of the Gross Domestic Product (GDP), but the MPs amended the Public Finance Management (PFM) Regulations as proposed by Treasury acting Cabinet Secretary Ukur Yattani to substitute it with Sh9 trillion.

The Treasury says that the new target in numerical limit will provide clarity in terms of controls and real-time oversight mechanism on the growth of public debt and safeguard public debt at sustainable levels as per the Constitution.

Even as the Treasury justified increased borrowing, House Minority Leader John Mbadi (Suba North) warned that the government has already violated the PFM Act by exceeding the current limit. He said the debt of Sh5.8 trillion is already above 50 per cent of the GDP.


Kenya’s Sh5.8 trillion debt as of June this year is some 62 per cent of the GDP.

In the current financial year, Parliament approved the national budget with a deficit of Sh635 billion to finance the operations of the national and county governments. This means that by the end of the fiscal 2019/2020, the country’s debt will be about Sh6.3 trillion.

“The concern now is about our debt sustainability,” Mr Mbadi said.

The Joint Committee of Budget and Appropriations of the National Assembly and the Senate’s Finance and Budget had proposed an amendment to have the ceiling capped at Sh7.5 trillion, but this was vacated as the matter was brought to the floor of the House.

Though he said that the move to increase the ceiling is justified so as to retire and restructure some of the most expensive commercial debts, Mr Mbadi said that the government has remained cagey on what previous borrowings have done to the economy.


“We have spent borrowed money on projects that are unidentifiable or cannot be shown to us. The government must know that the people of Kenya are not happy for putting us in this situation,” he added.

The Treasury also argues that it will create borrowing space to facilitate access to concessional funding sources — multilateral financing institutions and bilateral sources, thereby allowing for the retirement of expensive commercial debts.

During a meeting with MPs on Tuesday, Treasury argued that debt has been used the world over to rejuvenate economic systems from depression and that Kenya’s situation has been fairly sustainable and has never defaulted on its debt obligations.

International Centre for Policy and Conflict (ICPC) had urged the MPs to stop approval of the debt ceilings, a recipe for increasing and blatant borrowing until forensic audit for Kenya public debt is done.


Kenya’s spiralling Sh5.8 trillion national debts owed to internal and external creditors provide danger signal that the country may be overborrowing and overburdening its citizens with excessive loans,” ICPC Executive Director Ndung’u Wainaina warned. On average, the country will be spending Sh500 billion on loans’ interests’ repayment alone, Mr Wainaina said.

He added: “This is catastrophic. Public statements from CS Treasury clearly show the government is not only broke, but desperately struggling to pay the debt. It seems debt payments are eating into virtually entire revenue threatening to grind government operations to a halt.”