The Treasury has asked MPs to raise the public debt ceiling to Sh10 trillion to allow the State to borrow Sh846 billion to plug the budget deficit in the fiscal year starting July 1.
The Treasury Cabinet Secretary Ukur Yatani has published a gazette notice to amend Section 26 of the Public Finance Management Act, 2015 to raise the debt ceiling, even as he pushed a separate Bill to amend the Public Finance Management Act to change the debt cap to a percentage of GDP from the current hard cap.
The lawmakers raised the debt ceiling to Sh9 trillion from Sh6 trillion previously in October 2019.
“Pursuant to the provisions of Section 50(2) of the Act, the public debt shall not exceed ten trillion shillings,” Mr Yatani said in a May 26 legal notice.
The raising of the debt ceiling comes barely two months after 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 bigger budget deficit.
Legal limit
The House had in February overturned a recommendation by the Budget and Appropriation Committee (BAC) that limited borrowing for the upcoming fiscal year at Sh400 billion, in a bid not to breach the legal limit because debt is projected to cross the Sh8.6 trillion mark in June.
The House instead retained the Sh846 billion proposed by the Treasury in the 2022/23 BPS with a rider that the Treasury will present amendments proposing a higher limit before June for approval.
Parliament is also set to debate the State-backed Public Finance Management (Amendment) Bill 2022 that will cap public debt at 55 percent of GDP.
It will also allow the State to breach the borrowing caps in the event of war, a health pandemic or natural disasters.
The Treasury will have a free hand to breach the new debt ceilings as long as it can explain to Parliament what caused excessive borrowing if changes to the law are approved.
