• By the end of last year, the debt level had hit Sh5.28 trillion
• The debt is projected to hit Sh6.3 trillion by the end of the 2019-20 financial year
Image: PSCU
Kenya could lose eight crucial government institutions to international lenders if it defaults on loans.
A House team has questioned the government's growing appetite for borrowings, which, it says, put the country under serious threats. This comes as an MP seeks to have government borrowing controlled.
By the end of last year, the debt level had hit Sh5.28 trillion, translating into 52.7 per cent of the GDP, which is slightly above the set 50 per cent limit of the national public debt. The debt is projected to hit Sh6.3 trillion by the end of the 2019-20 financial year.
President Uhuru Kenyatta and opposition chief Raila Odinga are currently in China to pitch for Sh368 billion loan for the construction of the Naivasha-Kisumu standard gauge railway.
The government committed strategic assets as collateral to secure Sh147.7 billion loans from external lenders. The Parliamentary Budget Office has warned that the ballooning debt is pushing the institutes in charge of the assets to the edge.
Martin Masinde, the PBO deputy director and head of the microeconomic division, listed the Kenya Broadcasting Corporation, the Tana and Athi Rivers Development Authority, East African Portland Cement, Kenya Power and the Kenya Airways as some of the key government agencies guaranteeing huge loans.
Others are the Kenya Electricity Generating Company (Ken-Gen), Kenya Railways and the Kenya Ports Authority.
According to documents from National Assembly’s Budget office, the eight institutions had by December last year collectively guaranteed Sh147.7 billion.
A document tabled by Masinde before the Budget Committee says Kenya Airways is at the highest risk with Sh76.3 billion commitment, followed by Kenya Ports Authority (Sh33.6 billion) and Kenya Power (Sh14 billion).
Ken-Gen is guaranteeing Sh10.8 billion worth of loans, KBC (Sh6.9 billion), Kenya Railways (Sh4.5 billion), the EAPC (Sh674 million ) and Tana Athi Rivers Development Authority (Sh542 million).
Initially, the government had committed only KPA, KBC and Kenya Power up to December 2017 when the other five were roped in to guarantee more borrowings.
This comes as Emgwen MP Alex Kosgey pushes for a law change to control government’s borrowing, which he notes could plunge the country into a worse economic crisis.
The Public Finance Management (Amendment) Bill sponsored by Kosgey seeks to amend the PFM Act to provide for a specific limit of the amount that the government may borrow to reduce the country’s external and internal debt.
If the MPs pass the bill, any borrowing will first have to be approved by the National Assembly before the Treasury starts negotiating with potential lenders.
“The bill seeks to specify the exact limit of funds that can be borrowed to Sh6 trillion and providing for the need to ensure the Cabinet Secretary submits the intended purpose for borrowing and the envisaged repayment to the National Assembly,” Kosgey said.
By setting the debt limit at Sh6 trillion, the government will be in breach of the law if it succeeds in its new push to secure Eurobond 3 (Sh250 billion) and new SGR line (Sh368 billion).
(Edited by F'Orieny)