Is Parliament opening debt floodgates for the Executive?Friday October 23 2020
The unease over increasing public debt, now past the Sh7 trillion mark, has taken the centrestage in recent months with Kenyans raising concerns about the possible impact of the government’s increased borrowing appetite, in an already struggling economic environment greatly exacerbated by the Covid-19 pandemic.
This comes days after the National Treasury through the draft 2020 Budget and Review Outlook Paper (BROP) revealed that the government borrowing is likely to hit the statutory ceiling of Sh9 trillion, up from Sh6.6 trillion, before the end of President Uhuru Kenyatta’s term in 2022.
According to the BROP, the government projects higher borrowing for both financial years 2020/2021 and 2021/2022 with the deficit seen at 8.4 percent and 7.3 percent respectively due to expected lower revenue. This is likely to surpass the Sh9 trillion cap before the end of the 2022/23 fiscal year.
Meanwhile, the latest Parliamentary Budget Office report projects that the public debt will increase by Sh750 billion in the next 10 months. That is Sh2.6 billion a day!
Economists together with civil society organisations under the Okoa Uchumi banner have spoken out on issues concerning the government’s debt management including borrowing to repay matured loans and the non-essential expenditure overdrive.
Other concerns raised by the Okoa Uchumi lobby group include wastage of proceeds from loans, unsurmountable appetite for expensive loans from commercial entities both foreign and domestic, government’s ability to repay the loans, the sustainability of the debt burden, among other critical aspects.
However, the overarching concern is whether Parliament is playing its oversight role of the Executive’s appetite for borrowing. In the meantime, taxpayers are left bearing the brunt of a Parliament that has been converted into the Executive’s rubber stamp.
According to the Public Finance Management Act, 2012, legislators are required to carry out a critical role of ensuring that taxpayers are protected from the unsustainable debt burden and find value for taxes. Parliament is expected to scrutinise the government’s borrowing to ensure that it is within sustainable limits. The Constitution of Kenya 2010, under Article 201, demands openness and accountability in public funds.
The law permits the legislators to demand answers from the Executive with regards to details on loans to be procured, the ability to service the debts, and projects to be financed. The lawmakers are also expected to demand the prudent use of proceeds from loans in order to protect citizens from frivolous and disproportionate borrowing.
Through the scrutiny, legislators are required to determine if there is a genuine need for borrowing and whether the country has the capacity to repay the loan. Unfortunately, the legislators have failed in this mandate as witnessed by their action of unanimously increasing the State’s debt ceiling from Sh6 trillion to Sh9 trillion, opening the debt floodgates.
It is disturbing that Parliament is subservient to the whims of the Executive at the expense of taxpayer interests and the public good. Legislators are not asking enough questions, if any, before loans are procured and the Executive has had a field day seeking more loans for elite captured projects like SGR, JKIA-Westlands Expressway, among others that do not impact livelihoods for the majority of citizens.
With taxpayers expected to spend Sh904 billion this financial year to repay the accumulated debts – at the expense of service delivery – coupled with the government’s high appetite for more loans that are often shrouded in opacity, the debt situation is bound to get worse.
The loan procurement process needs to be transparent and inclusive of public participation as stipulated in the Public Finance Management Act, 2012.
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