Team asks for details on 'extra headroom to borrow'

National Treasury boss Henry Rotich (left) with Investment Secretary Esther Koimett at Continental House, Nairobi yesterday when they met the National Assembly Finance Committee. [PHOTO: BONIFACE OKENDO/ STANDARD]

Kenya: President Uhuru Kenyatta’s spending plans hit a snag after MPs and the Auditor General rejected a proposal to raise the borrowing ceiling to Sh2.2 trillion.

Doing so would allow the Government to borrow an extra Sh1 trillion to finance infrastructure projects, including roads.

Auditor General Edward Ouko likened the proposal to “mortgaging” the country for 50 years.

The National Treasury had a hard task explaining to the National Assembly why it needs more room to borrow an extra Sh1 trillion, which would raise the public debt to Sh2.2 trillion.

The MPs said figures by experts showed that all the Government needs for big-money infrastructure projects is an extra Sh30 billion above the current limit of Sh1.2 trillion.

MPs who sit on the House Committee on Finance, Planning and Trade, as well as the Parliamentary Budget Office – the fiscal experts and economists who advise MPs on money issues — yesterday said the push to raise the borrowing limit was "not clear".

The lawmakers said it appeared the Jubilee administration was keen to sink the country further into debt without a clear policy on how the current debt would be managed, what projects it would use the money for or how the country would pay the money back.

In an earlier memo to Parliament, National Treasury Cabinet Secretary Henry Rotich had sought to raise it to Sh2.5 trillion, but the motion before the House factored Sh2.2 trillion.

The Auditor General said it would take 50 years for Kenyans to repay the additional loan.

In Parliament, the experts said the MPs had a duty to question Rotich on the specific projects he intends to roll out, how they will be distributed across the country, and if there is a clear strategy on how the money will be repaid.

The presiding chairman of the committee, Sakwa Bunyasi (Nambale), led the House team in seeking details of why the country needed the "extra headroom to borrow", to allow MPs to explain the impact to Kenyans.

"The Cabinet Secretary must demonstrate to the committee that there will be a return on investment, that the money will grow the economy and that we can repay this debt. We might have to explain to our constituents that they should prepare to pay higher taxes," said Mr Bunyasi.

The current external debt is Sh1.045 trillion, with the biggest creditors being the International Development Agency, International Fund for Agricultural Development, Africa Development Fund, Japan, France and China. In a meeting at Nairobi's Continental House, the Parliamentary Budget Office told MPs that while they had no option but to raise the ceiling to allow the country roll out many of the infrastructure and energy projects, doubling it was too much.

Boost production

Parliamentary Budget Office Deputy Director Martin Masinde said the assumption of the National Treasury is that they will be spending lots of money on infrastructure projects.

"The savings are low and the investment needs are greater... the Government needs to borrow externally to meet the investment needs," Mr Masinde told the House committee.

The economist said the money must be used to boost production to spur growth.

The MPs looked at the maths from the National Treasury and it emerged that if nothing happens between now and December, when the money from the Standard-Gauge Railway project will be coming in, the inflows will burst the legal limit.

Masinde told the MPs that although their role is to give the National Treasury permission to borrow, the law requires them to ensure it is prudent.

He warned that increasing the ceiling would raise the appetite for borrowing and MPs had to be ready to approve huge amounts to cover interest repayments.

Timothy Bosire (MP Kitutu Masaba) claimed that the extra Sh1 trillion request was just Jubilee's carrot to bully the MPs with their numerical strength in the House into burdening the country with more debt, as President Kenyatta and his deputy William Ruto seek to implement their campaign pledges.

"If we give them a lot of space, they can use the tyranny of numbers to exploit it," said Bosire.

The MPs quickly asked for details of the projects that had made the Government push for the doubling of the ceiling to Sh2.5 trillion.

"We need to have a list of these projects and the estimated return, so that we are guaranteed that we can repay the debt," said Mrs Mary Emaase (Teso South).