Treasury CS Ukur Yatani proposed the amendment of the Public Finance Management Act to create more room to increase the debt ceiling to ease the growing expenditure pressures.
During the tabling of the kes 3.3 trillion, 2022/23 budget Ukur said they propose to replace the debt ceiling with a debt anchor and set it at 55 per cent of debt to GDP in present value terms.
“This is in line with internationally accepted conventional practice. The current legal numerical public debt ceiling has constrained public funding of projects while at the same time failing to consider the effects of external shocks on the economy.” Ukur Yatani.
In 2019, Kenya breached the East Africa Community debt ceiling after the MPs voted to increase the debt ceiling to Kes 9 trillion ($78.26 billion) compromising the government’s bid to comply with the region’s debt target that is equivalent to 50 per cent of GDP.
An analysis by the Parliamentary Budget Office showed that Kenya’s public debt at kes 7.99 trillion last September was equivalent to 64.2 per cent of GDP on net present value terms, higher than the 55 per cent being proposed.
A separate analysis by the Institute of Public Finance-Kenya (IPFK), a think-tank, suggests the nominal debt stock at nearly kes 8.03 trillion was equivalent to 66.2 per cent of GDP.
Last month, the National Assembly successfully overturned a recommendation by the Budget and Appropriation Committee that had limited borrowing for the financial year starting July at kes 400 billion in a bid not to breach the legal limit because debt is projected to cross the kes 8.6 trillion mark in June.
