National Treasury explains amendment to the Public Debt Limit

Mombasa, Wednesday, April 19, 2023

K.N.A by Sadik Hassan

The National Treasury and Economic Planning is conducting nationwide public participation on the amendments of the Public Finance Management (PFM) Act 2012 and its attendant regulations, to be consistent with the constitution and amendment to the public debt limit.

The proposed amendment to the public debt ceiling will give the Cabinet Secretary (CS), National Treasury, a leeway to borrow according to the economy's capacity to pay.

“The Cabinet Secretary shall at all times maintain public debt at levels not exceeding 55 per cent of Gross Domestic Product in NET Present Value (NPV) terms:

Provided that if the public debt exceeds the threshold, the CS will submit a written Report to Parliament, explaining the cause of the breach on the threshold and provide a time-bound remedial plan,’’ reads the proposed amendment.

Speaking to KNA during a public participation forum for Mombasa, Kwale and Taita-Taveta counties, the Chairman of the Task Force that deals with reforms on the PFM Act and PFM regulations from the National Treasury, Resource Mobilization Department, Michael Kahiti said the amendments will enhance accountability in Public Finance Management.

The Chairman said the amendments will make it possible for Kenyans to interrogate the level of debt that the government is taking and be able to track the capacity to pay or go slow on borrowing, when the economy contracts due to shocks.

“We had COVID-19 and the economy was not growing, it went down. The level of debt could not come down because the law could not let the public interrogate the issue of debt,’’ explained Kahiti.

Through the proposed amendments, Kahiti noted that when the economy can pay for debts, the CS can borrow since the capacity to pay will increase.

“At no time should we borrow without any comparison with the capacity to pay, therefore, the public will be reassured that their government is borrowing because the capacity to pay doesn’t compromise the delivery of other government services,’’ clarified Kahiti.

He went on: “In case they will be a contraction of the economy, we are going to use this law to slow down on borrowing and even go for debt restructuring, so that we can ensure the growth of debt is in tandem with the capacity to pay.”

The current law has limited public debt to Sh10 Trillion, with Kahiti arguing that, this was just a number that doesn’t have a relationship with the country's capacity to pay.

Courtesy K.N.A