Parliament has asked the Treasury to increase the debt ceiling to allow it borrow Sh846 billion to plug the budget deficit in the next financial year.
Majority Leader Amos Kimunya successfully pushed an amendment to the 2022/23 Budget Policy Statement (PBS) directing the Treasury to amend the law to accommodate the huge budget deficit.
Mr Kimunya, however, failed to disclose the amount that the government wants the Treasury to cap the new ceiling from the current Sh9 trillion, but sources in Parliament say the government has asked for Sh13 trillion.
The Treasury will now propose changes to the public finance management law and table the amendments for adoption by the House.
The Treasury had in the Medium-Term Debt Management Strategy 2021 said it will be tabling changes to the Public Finance Management law for approval by legislators to raise the cap on debt, without disclosing the fresh limit it is looking at. Lawmakers raised the ceiling from Sh6 trillion in October 2019.
In a chaotic session, Mr Kimunya marshalled his troops to overturn the Budget and Appropriations Committee (BAC) report which had imposed a Sh400 billion cap on new debt to avoid breaching the Sh9 trillion loan ceiling.
The MPs deleted the Sh400 billion cap and reinstated the Sh846 billion as contained in the BPS.
“The committee is concerned that the BPS had proposed an overall deficit of Sh846 billion, which if approved, has the potential to breach the approved debt ceiling of Sh9 trillion, the committee urges the National Treasury to amend the debt ceiling to enable them to implement the budget as proposed, rationalise expenditure or implement revenue-enhancing measures,” Mr Kimunya’s amendment states.
The MPs approved Mr Kimunya’s proposals asking the Treasury to amend the debt ceiling through acclamation.
BAC had refused to pass the deficit stating that the effect of approving the BPS would be an indirect breach of the ceiling and requested the Treasury obtain an advisory from the Attorney-General’s office.
BAC proceeded to cap the Executive budget to Sh1.5 trillion, Sh38 billion on Parliament, Sh18.8 billion on the Judiciary and Sh370 billion in counties.
But Mr Kimunya’s proposals mean that the government will spend Sh2 trillion on the Executive, Sh38.4 billion on Parliament, Sh18.8 billion on the Judiciary and Sh370 billion in counties.
The Treasury wants to spend Sh3.2 trillion with a budget deficit of Sh846 billion which would automatically breach the debt limits since Kenyan loans will hit Sh8.6 trillion in June.
The Treasury has introduced changes to the public finance management law moving from the loan limits from a fixed ceiling to 55 percent of the gross domestic product but is short on timelines.