The Senate has voted to increase the national debt ceiling from Sh9 trillion to Sh10 trillion.
A total of 27 senators voted to approve the increase while three opposed the motion during the voting that took place in the Senate chambers, concurring with their counterparts in the National Assembly.
The vote paves the way for the expansion of the amount the government can borrow from the international market at a time the issue of national debt is a hot political potato in the ongoing campaigns for the August 9 General Election.
The decision by the lawmakers is good news to the National Treasury that is desperately looking for funds to plug a Sh846 billion hole in the Sh3.33 trillion budget for the next financial year.
The vote opens the way for the Treasury to borrow and finance key projects in the medium term and assure the development partners who had threatened to stop funding ongoing projects if the debt ceiling was not increased.
Deputy President William Ruto and his Kenya Kwanza team blame the ‘handshake’ between President Kenyatta and ODM leader Raila Odinga for the runway national debt, adding that the country had borrowed beyond its ability to repay and further debt would be a burden to the economy.
The alliance has challenged the National Treasury, while preparing its 2022/23 budgetary estimates, to peg its fiscal management on the country’s budgetary capability without borrowing more.
“Time has come that we need to be more cautious in contracting national debt,” DP Ruto said during a campaign rally in Kiambu early this year.
He noted that while the government had focused on mega infrastructure projects to provide a foundation for an economic take off, it now has “to be deliberate about investments that would create jobs” for the legion of jobless youths who are entering the job market every year.
A total of 30 lawmakers participated in yesterday’s much anticipated vote. Seventeen senators, mostly allied to Kenya Kwanza, stayed away.
Nairobi Senator Johnson Sakaja, who is battling controversies related to his suitability to contest the governor seat, put aside his tribulations, attended the sitting and voted against the proposal. Others who rejected the plan were Mr Samson Cherargei (Nandi) and Mr Aaron Cheruiyot (Kericho).
Narok Senator Ledama ole Kina, who supported the motion, argued Kenya’s main problem is not the size of the debt but corruption.
“When debt is used correctively, it can lead to national transformation. One is the standard of living of the people of this country. Everyone needs a good road. If we borrow money and build roads, it makes it easier for us to get to where we are going. Those are the issues we should be discussing,” said Mr Ole Kina.
Nominated Senator Gertrude Musuruve supported the increase but challenged the national executive to put in place measures to ensure that the debt will be repaid in such a way that the common man is not adversely affected.
The new debt ceiling is beyond the debt carrying capacity the International Monetary Fund (IMF) and the World Bank benchmark at 55 per cent for Kenya as at December 2021.
But the National Treasury has argued that due to the post Covid-19 recovery programme supported by the IMF, the debt to gross domestic product ratio is expected to decline towards the debt carrying capacity level in the medium term.
The Treasury committed in 2019 that the debt ceiling of Sh9 trillion will be enough after 2024.
However, a number of unfavourable events have taken place that have led to the depletion of the ceiling. These include the Covid pandemic, Ukraine war and the resultant appreciation of the US dollar.
The Treasury says it has a number of policies aimed at addressing the macroeconomic pressures caused by increased expenditure demands and promoting fiscal consolidation.
These include use of more Engineering, Procurement and Construction Contracts (EPC) project financing. This method transfers all the risks associated with design, procurement and construction to the contractor, thus reducing project costs.