Economy

Parliament caps Treasury borrowing at Sh930bn

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Parliament buildings in Nairobi. FILE PHOTO | NMG

Parliament will not allow the Treasury to borrow more than 7.5 percent of the country’s economic output (GDP) to plug the budget shortfall in the financial year starting July 1.

The National Assembly has capped the amount of money that the Treasury can borrow up to Sh930 billion in the financial year 2021/22.

“The financial deficit (including grants approved by Parliament for the financial year 2021/22 is pegged at Sh930 billion or 7.5 percent of the GDP, whichever is lower.

“Any increase of the fiscal deficit beyond what has been approved in the Budget Policy Statement for financial year 2021/22 will not be approved by Parliament,” the Budget and Appropriations Committee (BAC) said in a report that MPs approved last evening.

The House has resolved that the Treasury can only borrow loans of up to Sh530 billion from domestic lenders and Sh399.9 billion from foreign sources to finance the budget in the coming financial year.

The committee chaired by Kanini Kega which scrutinised the 2021 BPS presented by the Treasury said the decision to cap borrowing is consistent with the debt mix that ensures there is a low cost and minimises risks.

“For avoidance of doubt and after consultation with the national Treasury, the committee has approved the debt mix ratio of 57:43 of domestic to external borrowing as provided for in the Medium Term Debt Management Strategy (MTDS),” the committee said.

“This strategy provides the optimal debt and is also consistent with key provisions of Section 50 of the Public Finance Management (PFM) Act, 2012.”