Experts want regulator to tame spiraling debt

The Government has been urged to establish an independent regulator to check runaway borrowing and prevent the piling public debt.

Auditing firm, PKF, yesterday raised concerns on the country’s spiraling debt as well as funds sunk into stalled or white elephant projects. The audit firm said there is a need for an independent body to enforce fiscal policy, preventing the use of short-term debt to fund long-term projects and monitor parliamentary approvals for new debt.

“PKF is calling for the establishment of an Independent public debt review and management mechanism to examine current debt and possible restructuring and provide oversight for future borrowings,” said David Kabeberi, a partner and managing director at PKF Consulting.

New revelations last week that the National Treasury had taken another Sh75 billion in loans for budgetary support from the World Bank caused uproar, with analysts cautioning the high debt levels could dampen the country’s future economic growth prospects.

At the same time, proposals by Parliament to tame the executive’s appetite for debt appear to be failing without adequate political goodwill to follow through.

Last year, the House had proposed any budget request from the executive exceeding Sh1 billion be subjected to parliamentary approval. This is, however, yet to be implemented.

According to PKF, there is insufficient information to establish if the public debt, which stands at a high of 51 per cent of GDP, is well planned.

“There is insufficient information to assess sovereign risk and risk of loss of control of infrastructure as a result of the high debt ratio,” said Mr Kabeberi.

Other measures proposed to reduce perennial budget deficits include a reduction of corporate tax rate to 20 per cent for a three-year period.