Public debt office set to get more powers in new lawWednesday March 22 2023
The Public Debt Management Office (PDMO) is expected to play a bigger role in the management of the country’s runaway debt under proposed amendments to the Public Finance Management Act No. 18 of 2012.
In the new Treasury proposals to amend the Public Finance Management (Amendment) Bill, 2023, the PDMO is set to earn additional powers including providing advisory on sustainable debt levels.
“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,” Treasury Cabinet Secretary Prof. Njuguna Ndung’u said in a notice on Tuesday.
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Currently, functions of the PDMO, which is headed by Dr Haron Sirima 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.
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.
Other primary roles handed to the office include promoting the development of market institutions for government debt securities and ensuring the sharing of the benefits and costs of public debt between the current and future generations.
The PDMO has three technical departments; resource mobilization, debt policy strategy & risk management and debt recording and settlement.
The greater role of the PDMO encompasses wider proposed changes to the Public Finance Management Act of 2012 which includes the proposed changes to the public debt limit from the current ceiling of Sh10 trillion to a new threshold that does not exceed 55 percent of GDP at present value terms.
The National Treasury has invited comments to the proposed amendments including attendant regulations until March 30.
In further proposed changes, the National Treasury Cabinet Secretary will be required to give an explanation to Parliament in writing, where public debt exceeds the threshold set out in the law and remedial plans.
“The principal object of this Bill is to amend the Public Finance Management Act to operationalize the public debt and borrowing with the provisions of the Constitution which define public debt to mean all financial obligations attendant to loans raised or guaranteed and securities issued or guaranteed by the national government,” Prof. Ndung’u added.
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The new amendment bill comes on the back of the new administration’s support for the proposed debt ceiling dubbed as a debt anchor.