Garissa Township MP Aden Duale wants National Treasury Cabinet Secretary Ukur Yatani compelled to explain why the ministry violated the law by exceeding the country’s debt ceiling by Sh40 billion without parliamentary approval.
In a request for statement, Mr Duale wants the Finance and National Planning Committee to have Mr Yatani explain why the ministry violated the Constitution.
Mr Duale used data submitted to Parliament by Treasury.
According to the information, total disbursed and undisbursed loans stood at Sh9.04 trillion at the end of June.
The loans, the figures from the National Treasury show, exceed the Sh9 trillion ceiling passed by Parliament in 2018.
“It is against this background that I seek a statement from the committee chairperson on the total loan commitments, including a breakdown by lender and the terms of repayment,” Mr Duale says in the letter to the committee that is chaired by Homa Bay Woman Representative Gladys Wanga.
Public debt stock
According to the National Treasury, the nominal public debt stock – including guaranteed debt – stood at Sh7.74 trillion, about 69.07 per cent of the country’s GDP at the end of June.
But even as the debt grows, servicing is proving to be a concern.
In this financial year alone, the government plans to spend Sh1.17 trillion – about nine per cent of the GDP – on public debt servicing.
Mr Duale says the increase in debt servicing has surpassed allocations for development by 189 per cent.
The total public guaranteed debt, including dormant loans by State-Owned Enterprises, and action taken by the National Treasury is a matter for the committee to interrogate, he says.
The Garissa Township MP wants the team to list government agencies that failed to draw down their loan balances on time, leading to utilisation of public debts for payment of commitment fees of about Sh1.66 billion as of June 30.
The committee is required to establish the total government budgetary allocations and actual expenditure for development per county from the financial year 2013/14 to 2021/22.
List of projects
This must include the list of projects and costs incurred by the government.
“Provide the criteria used by the National Treasury in the allocations for development expenditure to various regions from the 2013/14 fiscal year,” Mr Duale says.
The country’s Sh7.74 trillion debt is composed of 52.1 per cent or Sh4.04 trillion in external loans and Sh3.70 trillion, about 47.9 per cent in domestic borrowing, attracting a punitive annual interest rate of 11 per cent.
According to Mr Duale, the guaranteed debt stood at Sh158.78 billion with Kenya Airways, Kenya Power, Kengen, Kenya Railways Corporation and Kenya Ports Authority being the main beneficiaries.
The key driver of the growth of the public debt is the budget deficit of 7.8 per cent from 2013.
According to the National Treasury, the country’s public debt accumulation is because of running high fiscal deficits – spending more than what it has – and exchange rate movements.
The public debt has been growing from Sh163 billion in the 2009/10 financial year to Sh952 billion in the current fiscal year.
Fears abound that it would continue growing.
High risk of distress
The International Monetary Fund (IMF) report on the assessment of Kenya’s public and publicly guaranteed debt in March 2021 indicates that it is sustainable but with a high risk of distress.
The IMF has previously revised Kenya’s debt capacity from strong to medium.
“Kenya’s public debt benchmark was reduced from 70 to 55 per cent. The public debt to GDP at 69.07 per cent is above the indicative sustainability threshold,” Mr Duale says.