Emgwen MP Alex Kosgey has proposed an amendment Bill to the Public Finance Management Act to cap
government borrowing.
Kenya's public debt hit the Sh5 trillion mark in June, triggering caution from international credit agencies over its sustainability.
The figure is deemed as 10 times more than it was 19 years ago when the national debt stood at Sh480 billion.
Kosgey wants the National Treasury to seek the approval of Parliament before effecting any future borrowing that would push public debt above 50 per cent of GDP - which the country is not supposed to exceed.
Kenya's current debt is 57 per cent of the same.
He further wants the National Treasury CS Henry Rotich to submit the intended purpose for borrowing and the envisaged repayment to the National Assembly.
The legislator argues that it is a successful practice carried out in many countries like the US, Poland, Denmark and Malaysia.
"The Bill is an amendment of the Public Finance Management Act, 2015, which provided that a limit can be set by regulations," he said.
As the current law stands, the government can borrow as much as it wants as long as it gets approval from Parliament.
"Evidently, this has not happened," Kosgey said.
For every Sh10 collected by the Kenya Revenue Authority, Sh7 (or 70%) goes into repaying these debts.
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The Bill provides for it to be possible for the ceiling to be raised or lowered by Parliament after close consultations.
If passed, the government will only have a window to borrow up to Sh1 trillion.
Kosgey said the national government should borrow money only for the budget and allocations of loans as approved by Parliament.
He further states that Parliament shall provide for thresholds for the borrowing entitlements of the national government and county governments and their entities.
"In guaranteeing and borrowing money, the national government shall ensure that its financing needs and payment obligations are met at the lowest possible cost in the market which is consistent with a prudent degree of risk, while ensuring that the overall level of public debt is sustainable," the Bill reads in part.
"“The guarantee of debt shall be done in terms of criteria agreed with the Intergovernmental Budget and Economic Council and prescribed in regulations approved by Parliament."
The Emgwen MP said the new Sh380 billion loan for the extension of the SGR to Kisumu expected to be signed between September 1 and 4, will push the debt further up to at least Sh5.4 trillion.
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The government is also in talks with the Americans to borrow a further Kenya Shillings 450 Billion and contract an American company to expand the Nairobi-Mombasa highway.
"If this happens, it means Kenyans will pay an estimated Sh1 billion per kilometre," he said.
Kenya currently has the highest debt to GDP ratio in East Africa at 56.4 per cent. Its neighbours Burundi (55%); Uganda (40%); Rwanda (39%) and Tanzania (38%).
The international credit agency, Moodys has projected Kenya's debt will rise to 60 per cent by 2019 at the current rate of borrowing.
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