MPs in law change attempt to slow State’s borrowing spree

The Treasury will be compelled to seek approval of Parliament before signing any loan contract worth more than Sh1 billion if MPs approve changes to the Public Finance Management Act, 2012.

The National Assembly’s Public Accounts Committee (PAC) says it was unable to establish who is in charge of the country’s loan book.

“The committee recommends that Section 50 of the PFM Act 2012 should be amended to provide that any borrowing by the national government for a project to the tune of Sh1 billion and above should be approved by the National Assembly before the loan contracts are signed,” PAC said in a report to the House.

The committee tabled its findings and recommendations on the examination of Auditor-General report on the financial statements for the National Government for the fiscal year 2017/18.

PAC said the National Treasury was hesitant to fully operationalise the National Public Debt Management Office as provided in Section 62 of the PFM Act, 2012, hence the need to amend the Act to compel it to seek Parliament approval before signing the huge loans.

Currently, the PFM law allows the Treasury to contract new loans and present a quarterly report to Parliament.

“The committee observed and found that the Auditor-General could not confirm accuracy of the loan balances due to non-disclosures by the National Treasury.

“As a country we do not know our accurate total outstanding loan balance (both domestic and foreign loans),” PAC said.

Section 63 (b) of the PFM Act, 2012 requires that the Public Debt Management Office maintains a reliable debt database for all loans taken by the national and county governments and their entities including other loans guaranteed by the national government.

The committee chaired by Ugunja MP Opiyo Wandayi said Kenya has been accumulating public debt at the rate of 20 per cent per year over the past five years.

Latest Treasury data submitted to Parliament shows public debt crossed Sh7.28 billion last December, an equivalent of 65.6 per cent of gross domestic product (GDP), from Sh6.01 trillion or 58.0 per cent of GDP a year earlier.

Treasury had earlier projected total public debt to hit Sh7.66 trillion by end of the current financial year in June from Sh6.69 trillion a year earlier, but rise to Sh8.59 trillion in June 2022 and Sh9.37 trillion in the year that follows.

The Treasury in February revealed plans to raise its debt ceiling cap of Sh9 trillion to accommodate gaps in its expenditure needs amid underperforming tax collections.