The National Treasury has been given five years to bring down the country’s debt level to 55 per cent of Gross Domestic Product (GDP) after MPs approved the conversion of the ceiling from the current Sh10 trillion to an anchor.
Lawmakers last evening voted to approve the Public Finance Management (Amendment) Bill 2023 at its Third Reading and now awaits President William Ruto’s assent.
The Bill sets the debt threshold at 55 per cent of GDP in present value terms. It further provides a window, not exceeding 5 per cent, to accommodate the current debt to GDP ratio of 60 per cent.
The MPs deleted a clause that sought to create a provision for the Treasury Cabinet secretary to provide an explanation to Parliament in case the limit is breached.
“The Cabinet Secretary shall, not later than five years from the date of the coming into force of subsections (2A) and (2C), take measures to ensure that borrowing by the national government complies with the threshold prescribed in subsection (2A),” Makali Mulu, the vice chairperson of the Debt and Privatisation committee, said.
Mr Mulu moved further amendments to the Bill to require the Cabinet Secretary to submit to the National Assembly, by April 30 every year, a report on the debt status and the borrowing undertaken by the national government. The Debt and Privatisation committee of the National Assembly will be required to consider the report and table its findings and recommendations for consideration.
“The National Assembly shall discuss the report tabled by the Debt and Privatisation committee and may pass a resolution to adopt it with or without amendments,” the Bill reads.
President William Ruto’s Cabinet in March asked the National Assembly to change the debt ceiling from the current limit of Sh10 trillion to no more than 55 per cent of GDP.
The new administration will now be forced to find means to walk the country back on the breached debt ceiling through growing the economy and slowing down on new loans.
“As at the end of March 2023, public debt amounted to Sh9.39 trillion and is forecasted to range between Sh9.6 trillion by end of June 2023,” said Mr Mulu in the report. “Given the current stipulated public debt ceiling of Sh10 trillion, the borrowing space to finance the 2023/24 budget estimates is projected to be less than Sh300 billion.”
Nominated MP John Mbadi said whereas the committee’s further amendment has improved the Bill, he warned that Treasury is likely to abuse the plus 5 per cent window.
“I still find that the committee should have not allowed plus 5 per cent. When it comes to money matters, you cannot tell someone to spend 55 per cent but you can go up to 60 per cent,” Mr Mbadi said.
He added: “This provision of 5 per cent is wrong. You have not defined what amounts to exceptional circumstances. This provision will be abused by the National Treasury; spend money and come here and claim the borrowing was occasioned by exceptional circumstances.”
He asked Treasury to table regulations to define what exceptional circumstances are, otherwise the provision will be subject to abuse.
“Regulations will come after the Bill is signed into an Act. Rest assured that we shall hold the National Treasury to account. Never again shall this country be allowed to slide to where we are today in terms of debt,” said Majority Leader Kimani Ichung’wah.