Members of Parliament (MPs) in Kenya are seeking to amend the law to set limits on how much Treasury can borrow.
The Public Finance Management (Amendment) Bill 2019, in part, will require the Cabinet Secretary shall submit to the National Assembly the intended purpose for borrowing and the envisaged repayment plan.
The purpose of this Bill is to amend the Public Finance Management Act to provide for a specific limit on the amount that the Government may borrow to reduce the Country’s external and internal debt.
Parliament’s plan to curb huge public debt
MPs seek to entrench the oversight role of Parliament in law by ensuring that the National Assembly pays attention to the budget’s revenue side and not just on the expenditure part.
The proposed law mandates the Cabinet Secretary in charge of the National Treasury to seek Parliament’s approval before effecting any borrowing of funds.
Central Bank of Kenya (CBK)-the Government’s fiscal agent, conducts a weekly Treasury Bills Auction. It invites investors to bid for T Bills worth KSh 24 Billion to meet Treasury’s liquidity requirements.
MPs seek to specify the exact limit of funds that can be borrowed to KSh 6 Trillion and providing for the need to ensure that the Cabinet Secretary submits the intended purpose for borrowing and the envisaged repayment to the National Assembly.
MPs has since approved an increase in this borrowing limit to KSh 9 Trillion.
The Bill proposes that any expenses incurred in connection with borrowing by the National Government or Government securities issue are a charge on the Consolidated Fund or any other public fund set up the CS and approved by Parliament.
Expenses and costs, including interest and principal payments made by the National Government concerning loans to each level of Government, will be submitted to the Controller of Budget and Parliament at the end of each quarter.
The Bill says the National Government can only raise a loan if the terms and conditions for this loan meet fiscal responsibility principles set out in the most recent Budget Policy Statement.
Kenya’s Public Debt load
Likewise, the borrowing must align with the debt management strategy of the Government over the medium term.
This is made of KSh 3.5 Trillion in Domestic debt and KSh 3.8 Trillion( US$ 34.75 Billion) as the public &publicly guaranteed debt.
MPs through the Public Accounts Committee (PAC) has recommended that Section 50 of the PFM Act 2012 be amended to provide that the National Assembly should approve any borrowing by the national Government for a project to the tune of Sh1 billion and above before the loan contracts are signed.
The powerful parliamentary watchdog opines that National Treasury has been reluctant to set up a National Public Debt Management Office as provided for by the law.
MPs, through the PAC says there is thus need to amend the Act to compel it to seek Parliament approval before signing the vast loans.
The House is expected to discuss the PFM (Amendment) (N0.4) Bill, National Assembly Bill No. 78 of 2019) when it opens for business today, Thursday 25th March 2021.