UNSUSTAINABLE

Cap borrowing on GDP to end frequent debt ceiling push

In Summary
  • There are fears that continued borrowing may leave Kenya with a debt that it may not sustainably service.
  • While the government has to borrow to undertake key projects, that credit must not require raising the debt ceiling every year.
Treasury.
FILE Treasury.

Senators will this week vote on the National Treasury’s proposal to increase Kenya's debt ceiling to Sh10 trillion from Sh9.1 trillion.

The Treasury intends to borrow to plug a Sh846 billion deficit in the Sh3.34 trillion budget for 2022-23.

The bid to raise the debt ceiling comes barely three years after it was pushed from Sh6 trillion in October 2019. 

There are fears that continued borrowing may leave Kenya with a debt that it may not sustainably service.

The public debt has surpassed the Sh8 trillion mark and the rising debt stock has resulted in a high debt servicing expenditure amounting to Sh1.17 trillion up from the projected Sh952.7 billion.

Economists agree that spending more than 60 per cent of tax revenue to repay debt is highly unsustainable.

While the government has to borrow to undertake key projects, that credit must not require raising the debt ceiling every year.

Raising of the debt ceiling should be a temporary measure. Government should stick to the earlier plan to cap the borrowing ceiling as a percentage of the GDP and not an absolute figure that is often raised.

Quote of the Day: “As you will find in multivariable calculus, there is often a number of solutions for any given problem.”

John Forbes Nash Jr

The American mathematician and Nobel laureate was born on June 13, 1928