By David
Mwere, Nairobi KENYA
Kenya is
facing a debt crisis but government officials don’t seem to know what to do
about it. The obvious route is to borrow some more to pay old debts and finance
the budget.
An admission by the National Treasury that the
government is broke and may be unable to finance this year’s Sh3.02 trillion
budget if Senate rejects an increase in the debt ceiling to Sh9 trillion
exposed the sad truth.
Experts have raised the red flag that the country
cannot take up more debt but from acting National Treasury Cabinet Secretary’s
admission, we could be too deep in the hole that more debt is what will save
us.
Earlier, United States Ambassador to Kenya Kyle
Carter had said that the onus was on Kenya to sort the debt issue and that the
US government was fully committed to support the building of the expressway.
The Transport Cabinet Secretary James Macharia has
already announced that the Cabinet had suspended the project for at least two
years to allow the country’s debt levels to drop, while also prioritising other
important projects.
Mr Yattani made the revelations Wednesday during a
meeting with the joint sitting of the Senate Committees on Delegated
Legislation and Finance and Budget at the Kenyatta International Convention
Centre as Senators and the Institute of Certified Public Accountants of Kenya
(Icpak), dug in the issue.
“If we are not guaranteed this amendment, there
will be a crisis in the country because we will not be able to implement this
year’s budget. We will also be unable to do debt restructuring to retire some
of the old and expensive commercial loans with interest rates of up to 9.5 per
cent that are chocking our economy,” Mr Yattani said.
Initially, the Treasury thought it had already had
its way on October 9, when the National Assembly approved the amendments to
Public Finance Management (PFM) (National Government) Regulations seeking to
raise the debt ceiling to Sh9 trillion from the current Sh6.09 trillion,
surpassing the Sh5.8 trillion as of June, according to latest data from Central
Bank of Kenya (CBK).
However, it took the intervention of the Office of
the Attorney-General to remind Treasury mandarins led by the CS that it also
needed the input of the Senate to amend the regulations.
President Uhuru Kenyatta |
According to the Statutory Instruments Act of 2013,
regulations brought to Parliament for consideration by relevant government
agencies cannot be amended, they can only be approved or rejected.
Initially, the Senate had proposed a ceiling of
Sh7.5 trillion but withdrew after learning it was headed nowhere because of the
exigencies of the law.
This means that if the Senate rejects the PFM
regulations, they will be lost, meaning that the previous effort by the
National Assembly in approving them will amount to naught.
The implication of the Senate’s refusal to approve
the amendment means that the government will not borrow at least Sh635 billion
to plug the budget deficit in the current financial year.
The government requires the billions to finance
about 44 key infrastructure projects.
Any borrowing by the Executive is subject to
parliamentary approval. The Treasury wants the regulations amended to change
from the current debt to Gross Domestic Product (GDP) to a new target in
numerical limit figure.
The law provides a debt ceiling of 50 per cent of
Kenya’s GDP (about Sh9.5 trillion).
With the government having accumulated Sh6.09
trillion in public debt already, it means that it has overshot this limit by
about 63 per cent of GDP, which Mr Yattani admitted is in breach of the law
that now needs to be corrected through the regulations. It also means no more
borrowing can be done without amending the law to increase the debt ceiling.
Mr Yattani told Senators that negotiations into the
budgetary financing by various development partners have been concluded but
cannot be signed without amending the law.
However, the joint committee led by Pokot West
Senator Samuel Poghisio and representatives from Icpak poked holes into the
Treasury’s explanation.
Senators Mutula Kilonzo Junior (Makueni), Moses
Wetang’ula (Bungoma) and Irungu Kang’ata (Murang’a) warned that changing the
limit will plunge the country into unsustainable debt obligations.
“I am sorry I am not seeing any evidence of
restructuring the old and expensive loans,” Mr Kilonzo Jnr said.
Mr Wetang’ula said changing the current limit to
numerical limit is unconstitutional.
“Your right to borrow must equal the ability to
repay. If you want to open the ceilings do not take from the level of the GDP.
It is unconstitutional,” he said.
Icpak’s Public Accounts Committee chairman Erustus
Kwaka said amending the law as suggested by Treasury will cause debt distress.
“Debt to GDP has worked for this country for 57
years. What you are suggesting may move us to a higher and dangerous level,” he
said.
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