In a gazette notice seen by the Star dated May 26, the exchequer is proposing an amendment to the Public Finance Management Act to push the current debt ceiling to Sh10 trillion from Sh9.1 trillion.
"Pursuant to the provisions of section 50 (2) of the Public Finance Management Act, the public debt shall not exceed Sh10 trillion,'' Treasury CS Ukur Yatani says in the notice.
The latest weekly bulletin by the Central Bank of Kenya (CBK) shows the country's total public debt rose to Sh8.4 trillion in March from Sh8.2 trillion in December.
The new proposal, leaves the government taking over from the Jubilee administration with a borrowing room of less than Sh1.6 trillion.
This is the second time in less than two months the exchequer is seeking to adjust the borrowing limit.
In March, it issued a notice seeking to amend the Public Finance Management Act, 2012, to cap borrowing at 55 per cent of GDP in the present value term.
The proposal was opposed by a section of economists and civil society groups who insisted that a debt ceiling must be in the absolute figure, terming the exchequer's proposal as 'crafty'.
The latest official data put the country's normal GDP at 12 trillion and with a borrowing cap of 55 percent, this limits the amount to be borrowed to Sh6.6 trillion.
The International Monitory Fund (IMF) caps borrowing at 72 per cent of GDP. A country that surpasses this limit is considered to be in debt distress.
Kenya is close to exceeding the IMF's limit, as the ratio of the country's indebtedness to GDP is at 70 per cent.
The Institute for Social Accountability (TISA) termed the move a ploy to hoodwink the public on the true picture of the country’s debt position.
TISA executive director Wanjiru Gikonyo said debt to GDP as a measure of debt sustainability is extremely vague and provides a gap to hide the actual position of the country’s debt sustainability.
“What happened to the debt ceiling? What is the exchequer going to do differently considering that the same parameter has been unsuccessfully used before?’’ Gikonyo said.
''I wonder the motivation behind the treasury's flip flop around the debt ceiling issue but Sh10 trillion is unreasonable. The country is expected to borrow Sh852 billion this year. Will, this limit be revised annually?,'' an economist Japhet Wangila posed.
He added that it might be a plot by the current government to increase the limit for legacy purposes.
"Uhuru's regime may not want to be remembered for almost hitting the debt ceiling of Sh9.1 trillion but that is just my guess,'' Wangila said.
