- The Sh100 billion loan will cushion the shilling against major currencies' fluctuations
- Most of the funds to be borrowed are meant to retire past debts so that they don’t attract penalties
State agencies and devolved units will borrow up to Sh970 billion if MPs pass the proposed amendments to the Public Finance Management (National Government) Regulations, 2015.
The amendments will also allow the government to borrow Sh100 billion to cushion the shilling against major currencies.
With the Sh9.1 trillion borrowing cap, the government will be allowed to source Sh2.1 trillion to finance Vision 2030 and the Big Four agenda.
The proposals are in a document obtained during the Intergovernmental Budget and Economic Council meeting at Deputy President William Ruto's residence on Monday.
The IBEC meeting, headed by Ruto, discussed the proposals to amend the PFM Act 2012 and PFM 2015. It was attended by the 47 governors or their representatives.
“The total funds to be borrowed are Sh8.997 trillion. The burdens and benefits of the use of resources and public borrowing shall be shared equitably between the present and future generations.
“Sh970 billion will be increased to cater for guarantees to counties and state-owned enterprises,” said the document.
State-owned agencies are business enterprises in which the government has significant control through full, majority, or significant minority ownership.
Kenya’s current public debt stands at Sh5.8 trillion. Officials at the IBEC meeting told the Star the state intends to borrow Sh650 billion to bridge this year’s budget deficit.
“This will avoid disruption on the implementation of the 2019/20 annual budget and funding for the earmarked public projects including those targeted at Big 4 Agenda,” according to the document.
Most of the funds to be borrowed are meant to pay past debts so that they don’t attract penalties.
“These amendments will provide an immediate stop-gap measure to the current debt stock (close to the limit). Thereafter, the National Treasury will institute long term measures to manage expenditures and fiscal deficits to be within more sustainable limits.”
The meeting heard that the government needs to access concessional sources –multilateral and bilateral financial institutions – to enable it to pay off expensive syndicated/commercial loans.
Governors were also told that the National Treasury is drafting debt and borrowing policy to guide on contracting and management of public debt and to anchor debt management strategy.
“Counties will also be allowed to borrow externally,” an insider told the Star.
The state will ensure the National Treasury fully implements the PFM Act, which will report to Parliament with clarity on the numerical public debt limit.
The set debt limit, expressed in net present value terms as a percentage of GDP, is unclear, difficult to verify compliance and thus undermines accountability. “Legal limits may be breached on account of factors beyond the control of the national government,” the document adds.
Acting Treasury Cabinet Secretary Ukur Yatani proposed the amendments to Parliament so that the government can borrow more.
“Section 26(1) (c) of the national public debt shall not exceed Sh9 trillion,” the document noted.