MPs demand bigger say on state borrowing in new law 

Any borrowing by the national government that exceeds Sh1 billion will require the approval of the National Assembly if a proposed amendment to the law is passed and assented to by the President. 

The Public Accounts Committee of the National Assembly wants the Public Finance Management (PFM) Act amended to ensure that the country does not continue to pile up loans whose repayment may pose a challenge due to limited public resources.

“The approval must be sought from the National Assembly before the government signs loan contracts with various lenders,” the PAC, chaired by Ugunja MP Opiyo Wandayi, says in its report on the audited accounts of the national government for the 2017/18 financial year.

This amendment will require the National Treasury to engage an independent audit consultant to audit the national debt register and report to Parliament within three months.

The need for a national register was buttressed by the fact that the Office of the Auditor-General noted variances between figures reflected in the loan registers, other supporting schedules and the financial statements.

Further, the committee wants the National Treasury cabinet secretary to, within three months of adoption of the report, form a national task force on public debt.

The PAC report tabled in the house on Tuesday says spiralling public debt could strain the country coming at a time that the Kenya Revenue Authority (KRA) is facing challenges raising revenue to finance the country’s annual budgets.

The medium-term debt strategy paper, a document prepared by the National Treasury, shows that the nominal stock of public debt stood at Sh7.28 trillion (US$ 65.6 billion) as of the end of December 2020.

This is an equivalent of 65.6 percent of the Gross Domestic Product (GDP), the country’s wealth.

However, a recent Parliamentary Budget Office (PBO) document on the macroeconomic challenges underpinning the budget implementation for the current financial year, shows that the country's public debt stands at Sh8.41 trillion.

Approval by parliament

The lack of approval by parliament before the external loans are procured by the government has been PBO’s main concern in managing public debt.

In Uganda, where the committee relied on in drafting the recommendations, parliament has to approve each loan agreement before it is signed while in Kenya, MPs only approve payment of the loans.

The 2021 Budget Policy Statement (BPS) projects that the government will borrow from the local and external market at least Sh1 trillion to bridge the deficit in the Sh3.02 trillion budget for the 2021/22 financial year.

This will require amendment to the PFM (National Government) Regulations to increase the national debt ceiling from the current Sh9 trillion.

Already, there have been talk of raising the ceiling to Sh12 trillion despite concerns from the public, politicians and the international community.

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