Treasury Cabinet Secretary Njuguna Ndung’u will have five years from the assent of the Finance Bill to abide by the country’s debt anchor set at 55 percent of GDP in present value terms.
This follows new amendments carried in the 2024 Finance Bill, which have cleaned up clauses contained in the 2023 Public Finance Management (PFM) Amendment Act.
Under the 2023 amendments to the principal PFM Act, the national government borrowing was not to exceed the debt anchor. The exchequer would be allowed to breach the threshold in exceptional circumstances, but not by more than five percent.
However, the amendment Act failed to provide timelines to the adherence of the provisions even as it obligated the Treasury CS to ensure that borrowing complies with the prescribed debt anchor within five years.
By cleaning up the changes from last year, the Treasury CS will now have five years from the assent of the Finance Act to adhere to the debt anchor.
Government has been banking on expenditure cuts and higher taxes to set public debt levels on a sustainable path.
New tax proposals passed in Parliament Tuesday, and which seek to deliver Sh303 billion in fresh nettings for the Treasury, are part of the government plans of arresting high levels of public debt.
The new tax proposals adopted include a higher import declaration fee at 3.5 percent from 2.5 percent and a raised railway development levy at 2.5 percent from 1.5 percent previously.
The Treasury is also eyeing additional revenues from the proposed increase in the road maintenance levy by Sh7 from Sh18 to Sh25.
The proposal is currently under public participation by the Kenya Roads Board.
The new 55 percent debt anchor replaced the previous nominal debt ceiling set at Sh10 trillion.
In January, the International Monetary Fund (IMF) stated that it expected Kenya to reach the new debt anchor/ceiling in 2029 as it currently assesses the country’s debt levels as high risk for distress.
“Kenya’s public debt is assessed to be sustainable but remains at high risk of distress. In line with staff’s earlier recommendations, the authorities, with the approval of Parliament, have replaced the nominal debt limit with a debt anchor of 55 percent overall debt/GDP in present value terms. They expect to reach it by 2029,” the IMF stated in a report.
Other interventions expected to deliver the target for the debt anchor include the development of an operational framework for public debt management.
Kenya's total public debt stood at Sh10.3 trillion at the end of March 2024.
