Economy

Senate clears last hurdle in plan to raise debt cap

ken lusaka

Senate Speaker Ken Lusaka. FILE PHOTO | NMG

The Treasury is now free to borrow Sh846 billion to plug the budget deficit in the fiscal year starting July 1 after the Senate approved the proposal to raise the debt ceiling to Sh10 trillion, clearing the last hurdle.

This is after the Senate marshalled 27 delegations to increase the debt ceiling from Sh9 trillion set in October 2019.

The Senate votes through the 47 elected senators and it requires a two-thirds majority or 24 senators to pass a bill or a motion on the floor of the House.

Only three Senators allied to Deputy President William Ruto-Samson Cherargey (Nandi), Aaron Cheruiyot (Kericho) and John Sakaja (Nairobi) voted to reject the increase of the debt ceiling.

“This is the results, abstentions zero, nays three and ayes 27. The ayes have it,” Speaker Ken Lusaka ruled.

The increase in the debt ceiling means that the Treasury can now turn to local and international lenders to bridge the Sh846 billion gap in the Sh3.33 trillion budget for the 2022/23 financial year.

Reports by the Finance committees of the Senate and the National Assembly indicate the country’s debt stock stood at Sh8.6 trillion, leaving the government with a Sh400 billion headroom to borrow.

A threat by some to shoot down the motion on debt ceiling adjustment saw the House postpone the vote from June 16, 2022, to last evening.

The National Assembly a fortnight ago voted to increase the debt ceiling to Sh10 trillion by amending the Public Finance Management (PFM) (National Government) Regulations of 2015.

Leader of Majority Amos Kimunya in the National Assembly, who initiated the debate on the debt ceiling adjustment, told MPs that the country is in a situation where it cannot do the 2022/23 budget without raising the debt cap.

He said the increase in the debt limit is an interim measure that will allow the next government to seek funding to run its programmes as it works towards sustainable ways to raise internally generated revenue.

The lawmakers raised the debt ceiling to Sh9 trillion from Sh6 trillion previously in October 2019.

Mr Kimunya told MPs that the committee chaired by Tiaty MP William Kamket rejected the Treasury’s proposal to amend the Public Finance Management (Amendment) Bill 2022 that seeks to cap public debt at 55 percent of GDP.

The proposed limit of 55 percent of GDP in net present value terms is in line with international standards for a lower-middle-income economy such as Kenya.

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