President William Ruto’s government is working on a plan to make the debt office at the National Treasury autonomous to enhance accountability and transparency in public debt management.
This means that the Public Debt Management Office (PDMO) will soon have the power to approve or reject proposed loans, a major boost for the office.
The Business Daily has learnt that plans are at an advanced stage to make PDMO, which is a department at the National Treasury, autonomous like the Central Bank of Kenya (CBK).
This will be a build-up to the recent proposal to give PDMO, whose director-general is Dr Haron Sirima, additional functions of advising Parliament and the Cabinet secretary on the sustainable levels of public debt and the annual borrowing limit.
“Right now you can advise the CS against taking a certain loan but they are free to do what they want to do,” said an official close to the developments.
The role of public debt management has become critical after the country’s debt vulnerabilities got worse, with the World Bank and International Monetary Fund debt sustainability analysis raising the country’s debt distress to high from moderate.
As of January, total public debt stood at Sh9.18 trillion, with servicing of these debts taking a big chunk of Kenya’s tax revenues.
An independent PDMO, the source said, is likely to slow down the accumulation of debt and bring it down to the proposed level of 55 percent of gross domestic product (GDP).
As of December last year, debt to GDP stood at 61 percent.
In new regulations, the Treasury intends to amend the Public Finance Management (Amendment) Bill, 2023, with the PDMO earning advisory powers.
“The bill seeks to amend the Act by adding functions of the Public Debt Management Office to include advising Parliament and the Cabinet Secretary on the sustainable levels of public debt and the annual borrowing limit,” said Treasury Cabinet secretary Njuguna Ndung’u in a notice on Tuesday.
The Public Debt Management Office’s functions currently are limited to preparing key debt documents and policies such as updating the annual medium-term debt management strategy and acting as the principal in the issuance of government debt securities on behalf of the exchequer.
Other changes on public debt in the proposed regulations are currently being subjected to public participation, including replacing the public debt limit from the current ceiling of Sh10 trillion to a debt-to-GDP anchor of 55 percent at present value terms.
The PDMO is a directorate at the National Treasury headed by a director general reporting to the Treasury Cabinet Secretary and whose main objectives are minimising the cost of public debt management and borrowing over the long term taking account of risk.