• Government unable to disburse funds for development projects
• The proposed limit is Sh3 trillion more than the law permits
Government operations might grind to a halt if Parliament does not allow the cap for State borrowing to rise to Sh9 trillion, acting Finance CS Ukur Yatani told the Senate on Wednesday
Yatani pleaded with the senators to approve the Treasury notice to change the law as the government has reached its borrowing limit.
The proposed limit is Sh3 trillion more than the law currently permits.
“I appeal to you to approve it. We have not thought about the options we have just in case you reject it,” Yatani said when Kericho Senator Aaron Cheruiyot asked what he intends to do should the Senate reject the proposal.
The CS said the government is unable to disburse funds for development projects due to the borrowing limit. He cited health, electricity and infrastructure as the projects to be affected right away.
Yatani, who was before the Committee on Delegated Legislation and the Committee on Finance and Budget, said the government is not asking to be allowed to borrow Sh3 trillion at a go.
The National Assembly has approved the proposal, but senators insisted the amendment has to go through them.
The CS wants regulation 26(1) to be amended by deleting the words “50 per cent of Gross Domestic Product (GDP) in net present value terms”.
Kenya’s total loans reached Sh6 trillion in August after the country borrowed Sh200 billion in two months.
There has been a sharp increase in government borrowing since President Uhuru Kenyatta came to power in 2013. Standing at Sh5.8 trillion, the country’s debt is about 300 per cent more than the Sh1.89 trillion Uhuru inherited from the Mwai Kibaki administration.
The figure, according to most Kenyans, is unacceptable as it heavily burdens future generations.
Yesterday, Yatani told the joint committee chaired by West Pokot Senator Samuel Poghisio, that the National Treasury wants to borrow money to pay off expensive loans and take those with longer repayment periods and lower interest rates.
“We are doing this in good faith because we are getting to very dangerous levels if we don’t borrow more money. We have to take on the bull by the horns and not sweep matters under the carpet,” he said.
He said the 2019/2020 budget cannot be implemented fully with the way things are at the moment.
Bungoma Senator Moses Wetang'ula said the government – if allowed to go on with the current borrowing trend – will overburden future generations with debt “given the appetite of borrowing in the last six years”.
The senator cautioned: “Your right to borrow must be equal to your ability to pay."
He said the government should not borrow unreasonable, unmanageable and unsustainable amounts.
Cheruiyot said the government should not form the habit of planning to spend what it does not have. “We might be willing to accommodate you on the ongoing projects but borrowing to start fresh projects will not be allowed.”
Makueni Senator Mutula Kilonzo Jnr expected the Treasury to be more persuasive in asking for the borrowing limit to be increased.
“You need to convince us why you want us to allow you to borrow Sh3 trillion more. You cannot ask for our approval just like that,” he added.
Yatani explained that Parliament will still be approving all borrowings even when the limit is increased.
“When borrowing is managed well, it is not a bad thing, as long as debt levels are sustainable,” he said.