Parliament has given the Jubilee government the green light to borrow more money after MPs raised the debt ceiling to Sh9 trillion.
After exceeding the ceiling currently set at 50 per cent of the country’s Gross Domestic Product (GDP), Treasury Cabinet Secretary Ukur Yattani convinced MPs to open the window for more borrowing, even as questions remain on the sustainability of the country’s debt.
The current public debt stands at Sh5.8 trillion which is 61.8 per cent of GDP. This means that the Government has exceeded the allowable limit in law, and cannot borrow any further.
Yatani sought that regulation 26(1) be amended by deleting the words “50 per cent of GDP in net present value terms”.
Yesterday, lawmakers voted on a report of the Committee on Delegated Legislation that had allowed an amendment to the Public Financial Management Act to make the changes.
To convince the lawmakers, Treasury had said that the new regulation will provide control and timely oversight mechanism on the growth of public debt.
It also dangled the carrot that it will allow completion of projects already being undertaken by the national and county governments.
"The regulation seeks to allow the Government access to concessional funding sources thereby facilitating government intervention in the public sector," Treasury said in its regulatory impact statement.
And with the possibility of more taxes hanging over the heads of taxpayers, the Government had no option but to convince Parliament to shift goalposts and to allow it to satisfy it appetite for more money.
"The National Treasury is proposing an amendment to the Public Finance Management (National Government) regulations 2015...the purpose of the amendment is to set a limit on total public debt as required under the PFM Act, 2012. The proposed amendment is subject to approval by Parliament," read a letter from Treasury CS to the clerk of the National Assembly, Michael Sialai.
Chair of the Budget Committee Kimani Ichung’wa, however, argued that raising the debt ceiling will give the Government a blank cheque to engage in a borrowing spree. He said that Parliament will still approve any new loans taken by the Government.
"We have surpassed out debt ceiling. That means even the budget we passed is not implementable. The CS cannot negotiate even a shilling as we have already exceeded the debt ceiling. Every year, the Government seeks approval on how much can be borrowed. We may never touch the Sh9 trillion ceiling," said Mr Ichung'wa.
He added:"Anytime the government wants to borrow, it comes to Parliament. If we don’t allow the open ceiling it will mean more taxes for Kenyans to fund government projects. We cannot raise all the money from our own revenue unless we go out and borrow."
Leader of Majority Aden Duale termed the changes 'a very important matter for the country'.
"The 2010 Constitution has given power to Parliament that stipulates that the national government may borrow not exceeding the limit set by Parliament...What we are doing is anchoring in law and we represent the people of Kenya. If we read the BPS, the budget committee recommends that the PFM Act should be amended to provide for a numerical debt ceiling as opposed to the current formula where the debt is pegged on the GDP. We might borrow now but in future, we will see the achievements,” said the Garissa Town MP.
His Minority counterpart John Mbadi said he supports the raise to help in the implementation of government projects.
“The current debt is above 50 per cent of the GDP. The reason the Government is coming to us is to be able to comply with the law. We have already reached the GDP limit, and the question we need to ask is how government projects will be funded," he said.
Mohammed Mohamud (Wajir South), however, opposed the changes, telling the House that the country is already reeling under the burden of loans.
“Let us debate facts and figures. This county needs to be salvaged from debt. Open debt does not work in any accounting books. We must have a safeguard," he said.
Junet Mohammed (Suna East) said he supported the changes 'since I know that the war on corruption is on course".
Gladys Wanga (Homa Bay) said: “No economy grows without borrowing," she said.