- Authority will maintain a register of all loans advanced to national and the county governments.
- It will implement the government’s borrowing policy to minimise costs.
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The National Treasury’s Public Debt Management Office will be replaced should MPs enact a law establishing a semi-autonomous authority to manage public debt.
The Public Debt Management Bill, 2020 seeks to establish the authority to implement the government’s borrowing policy to minimise costs.
The bill sponsored by Nambale MP Sakwa Bunyasi provides that the authority will maintain a register of all loans advanced to national and the county governments.
It will be managed by a board comprising of a chairperson appointed by the President, Treasury CS, the Attorney General, Central Bank of Kenya governor, and the CEOs of the Capital Markets Authority, NSE and KIPPRA.
Accountants organisation ICPAK, Kenya Bankers Association, Kepsa and LSK will nominate one person each to the board.
The authority will also assist county governments manage their debt and will be run by a director general appointed by the board.
Amani National Congress leader Musalia Mudavadi on whose party ticket Bunyasi won election, has been pushing for the creation of the authority.
He said the entity would help regulate reckless borrowing by the state, whose public debt stood at Sh7.1 trillion as of September.
The National Treasury is seeking a further Sh400 billion from the International Monetary Fund and World Bank, eliciting concerns of debt sustainability.
Musalia had challenged Parliament to create laws to safeguard the interest of Kenyans in current and future borrowing.
For efficient management, Sakwa proposes that a registrar be recruited by the board for national loans, guarantees and government securities.
“The registrar shall establish and maintain a register for loans, guarantees and securities issued by or on behalf of the national government,” the bill reads.
Loans, guarantees and securities issued by or on behalf of the national government will be published in the Kenya Gazette.
Treasury will not be allowed to borrow beyond the caps set in the most recent Budget Policy Statement.
The national government will be required by law to ensure the financing needs and payment obligations are met at the lowest possible cost.
State will be compelled to ensure that the overall level of public debt is sustainable and not exceeding the limit set by Parliament.
“The national government may borrow money only for the budget and the allocations for loans as approved by Parliament,” the bill reads.
Parliament will provide thresholds within which the national and county governments can borrow.
The government will not be liable to contribute towards payment of any debt or liability owed by state agencies it has not guaranteed their loans.
The Cabinet Secretary will be required to designate in writing, apart from accounting officers, persons authorised to execute loan documents.
Treasury will only issue securities within the borrowing limits whereas loan agreements may be amended depending on the level of indebtedness.
“The Cabinet Secretary shall ensure that every national government security is given in the name of the Republic of Kenya,” Sakwa proposes.
A national government security, including the external ones, will not attract stamp duty.
All loans shall be approved by Parliament, including guarantees of loans to county governments or any other borrower.
Treasury will not however guarantee a loan for capital projects; if a borrower is capable of repaying the loan; where there is sufficient security – in case of private borrower; and if the borrower has a healthy balance sheet.
The authority will together with CBK and Treasury determine the form of securities to be created, issued or floated.
The bill allows county governments to borrow domestically or from foreign sources within limits set in the most recent County Fiscal Strategy Paper.
“The county assembly may authorise short-term borrowing by county government entities for cash management purposes only,” the bill reads.
Such borrowing, however, will not exceed five per cent of the most audited revenues of the specific county and will have to be repaid within a year.
The authority will be required to report to Parliament every March 31 and September 30 on the government debt management activities.