Parliament will enlarge the debt ceiling currently set at Sh9 trillion to accommodate Treasury’s borrowing for development spending, Majority Leader Amos Kimunya has said.
Mr Kimunya said the National Assembly will look at the reasons behind the Treasury’s proposal to increase the statutory debt ceiling and act accordingly once the request is tabled in the House.
“We don’t want debt to rise but Kenyans want development. We will look at the Treasury proposals and if it is for raising money for development, we have no problem even if they want the ceiling set at Sh20 trillion,” Mr Kimunya said.
“We will look at the merit and demerits on what the budget needs to adhere and not the limit or ceiling. I have been there (Treasury) and I know,” Mr Kimunya said.
The Treasury is seeking Parliament’s nod to raise the debt ceiling to accommodate gaps in its expenditure needs amid underperforming tax collections.
The Treasury disclosed in the Medium Term Debt Management Strategy 2021 that it will be tabling changes to the Public Finance Management law for approval by legislators in the near future to raise the cap on debt, without disclosing the fresh limit it is looking at.
The ceiling was last raised from Sh6 trillion in 2019, reflecting growing borrowing due to gaping budget deficits and investments in infrastructure projects like roads.
“The formulation of this strategy has been on a background of public debt stock fast approaching the statutory ceiling of Sh9 trillion set out in the Public Finance Management Act, 2012,” Treasury officials wrote in the debt strategy paper for the next three years.
“As a result, the implementation of this strategy may require the revision of the debt ceiling through the amendment of the PFM Act based on future borrowing requirements.”
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 data shows.
Treasury earlier projected total public debt will 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 by mid 2023.
Addressing a news conference at his Parliament office over the next phase of the Building Bridges Initiative’s (BBI) Constitution (Amendment) Bill, 2020, Mr Kimunya said Kenya will have to rely on borrowing since domestic taxes are not enough to implement development projects.
“Japan has taken a huge debt to develop and so long as the loan is directed to development, there is nothing wrong to borrow up to 60 per cent of our GDP,” Mr Kimunya said.