The National Treasury want public debt limit reverted to the old system based on percentage of the country’s Gross Domestic Product as opposed to a fixed figure ceiling.
In a memorandum to amend the Public Finance Management Act, 2012, the exchequer wants Kenya to cap its borrowing at 55 per cent of GDP.
“The Cabinet Secretary National Treasury shall at all times use his best endeavour to maintain the public debt at a level not exceeding 55 per cent GDP in present value terms,’’ the proposal reads in part.
The country’s debt currently stands at Sh8.2 trillion or 76 per cent of the country’s GDP , way above the proposed limit.
The International Monetary Fund (IMF) caps debt to GDP at 72 per cent.
Even so, this mode of debt measuring has been contested with various credit rating firms including Moody's recommending debt to exports ratio.
The proposal intends to change the existing debt ceiling limit as approved by the Parliament in 2019 which saw the country’s borrowing power capped at Sh9.1 trillion.
The exchequer’s proposal is coming at the time the Parliament is deliberating on majority leader’s request to push the current debt ceiling to Sh13 trillion to allow the government borrow Sh846 billion to plug the budget deficit in the next financial year.
The current debt ceiling of Sh9.1 trillion only gives the country a borrowing leeway of less than Sh1 trillion.
Last month, Majority Leader Amos Kimunya successfully pushed an amendment to the 2022/23 Budget Policy Statement (PBS) directing the Treasury to amend the law to accommodate the huge budget deficit.
Treasury also wants the law changed to provide that public debt is not restricted as a charge on the Consolidated Fund.
The bid is to get a leeway to charge ministries, state departments, and agencies repayments for public debt.
The proposal will be debated by the Parliament before approval.
