The National Assembly could get back direct control over Kenya’s level of borrowing if an amendment sails through.
The draft Bill by Emgwen MP Alexander Kosgey seeks to limit State borrowing at Sh6 trillion unless an adjustment is made by Parliament and the Senate.
Mr Kosgey said the National Treasury has been using a complex formula to defend huge borrowing that is driving the country into a debt trap.
MPs, he noted, needed to step in to check the trend that is likely to land the country into a debt crisis.
“One problem is that currently; it is hard for most people to understand the level of debt. The purpose of the law is not to make things obscure but for ease of understanding and planning,” he said in Nairobi yesterday.
Currently, the National Treasury is limited to borrowing less than 50 per cent of the economy or the gross domestic product (GDP) in net present value terms, which Treasury claims are still within limits.
However, in absolute terms, debt to GDP is close to 60 per cent.
This has not always been the case. In 2014, the State asked Parliament to increase the external borrowing ceiling by Sh1.3 trillion to Sh2.5 trillion and pushed up the total debt to Sh2.4 trillion.
This was supposed to be done annually, but the new administration had other plans.
Legislation made under the Jubilee administration quietly took away Parliament’s direct control over the amount Treasury is allowed to borrow. Instead, it was given to the executive.
Under the new Public Finance Management Act of 2015, the parliamentary oversight role was removed and Parliament was given a say over the budget while Treasury drove the financing agenda.
Without a cap, the State quickly hit a milestone when it crossed the Sh3 trillion mark in 2015 and has been doing on average a trillion annually.
In 2017, the Government crossed the Sh4 trillion mark. In June this year, it crossed the Sh5 trillion mark, even as Treasury outlined a Sh558.9 billion borrowing calendar in the current financial year.
Kosgey also wants Finance Cabinet Secretary Henry Rotich to come up with a payment plan for all new loans the Government intends to take if it wants the ceiling revisited.
“When they were borrowing for the Standard Gauge Railway (SGR) they told us that we would make savings from faster transport and revenue would go up to pay the debt.
“But what we have seen is that we are subsidising the SGR and at the same time going to borrow more to get it to Kisumu without knowing if it will be profitable,” Kosgey said.
He observed that Treasury had been giving vague promises that Kenya would get additional revenues from mining to repay debts, which have not materialised.
The National Assembly has done little to control Treasury’s appetite for huge borrowing, approving expanded budget deficits and supplementary budgets without looking at reduced growth in revenues.
Analysts say MPs have only been focusing on their perks, loans and mortgages while paying little attention to Treasury’s debt management strategy.