Senate votes to raise Kenya’s debt ceiling to Ksh.9 trillion
- The approval by the lower house follows a vote on the motion on Wednesday afternoon with the proposed revision garnering the support of 30 of the 47 senators in the Senate.
- The new Ksh.9 trillion borrowing ceiling is expected to be anchored in law, replacing the current threshold of debt in net present value (NPV) at no more than 50 percent of Gross Domestic Product (GDP) as outlined in the Public Finance Management Act of 2012.
Senators have this afternoon approved of the adjustment of the National Assembly-backed revised borrowing ceiling to Ksh.9 trillion.
The approval by the Senate follows a vote on the motion on Wednesday afternoon with the proposed revision garnering the support of 30 of the 47 senators.
The new Ksh.9 trillion borrowing ceiling is expected to be anchored in law, replacing the current threshold of debt in net present value (NPV) at no more than 50 percent of Gross Domestic Product (GDP) as outlined in the Public Finance Management Act of 2012.
The senator’s approval will come as a big win to the new Treasury’s team public debt restructuring framework which is anchored on replacing expensive debt with cheaper and long-term concessional options as a measure to provide relief to the pent up debt distress.
Senate’s joint committee Delegated Legislation and Finance had already added up the stakes for the house in its recommendation to adopt to the proposed debt ceiling as originally pitched by the National Treasury.
“If the senate was to shoot down the proposed regulations, a crisis would occur where the National Treasury would have to cancel all of these projects and do a drastic cutback of the budget that have been allocated already to the Judiciary, National Assembly, Executive and the Counties as there will be a huge deficit,” noted the Committee’s report.
Subsequently, the vote serves to unlock an estimated Ksh.421 billion in program loans support from both multi-lateral and bilateral partners whose signing was pegged on the allowance of further lending by government.
Among the projects lined up for new loans support include the construction of the Mombasa Gate Bridge and Konza City.
While the measure serves to alleviate pressure on government budgetary support, the move to lock in the public debt ceiling has warranted criticism including that of the World Bank who see the switch as one to saddle the country with more debt.
Machakos Senator Mutula Kilonzo Jr. has for instance criticized fellow Senators for falling for the State ploy to extend the country’s public debt.
“Even if it takes just one voice, it must take that voice to bring that sense to this republic. Senators have the right to square up to the Executive and tell them we can’t continue borrowing,” said Kilonzo.
Acting Treasury Cabinet Secretary Ukur Yatani has however stood by the new ceiling as he warns of the closing walls for Kenya in its debt management.
According to Treasury estimates, Kenya’s debt is expected to grow to Ksh.6.3 trillion by June next year but will ease to hit the new ceiling at the end of the current medium term plan III.
Having surged by nearly 2.5 percentage points of GDP in the last year Kenya’s public debt hit Ksh.5.89 trillion at the end of June and has since extended to breach the Ksh.6 trillion mark at the end of September.
The hiking of Kenya’s public debt warranted the wrath of the International Monetary Fund (IMF) in 2018 as the multilateral lender reclassified the country’s debt distress from low to moderate
Unable to plug the country’s budget deficit, the National Treasury has moved to instill spending cuts within government ministries and departments as the State falls short of its domestic revenue mobilization bid.
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