The National Treasury and Economic Planning has organized public participation forums nationwide to gather views on the proposed bill that seeks to review the national debt management policy.
Speaking during the citizen participation to amend the Public Finance Management Act, 2012 (PFMA) in Kisumu County Monday, Director of Planning at the ministry, Monica Asuna said the bill would help address the emerging debt concerns amid the rising costs of living.
The proposed bill will be introducing a debt anchor that is pegged at 55 percent of the Gross Domestic Product (GDP) in the present value terms replacing the current Shs.10 trillion public debt ceiling.
“The constitution defines that the public debt will be set at a nominal value of Sh.10 trillion, we are seeking to revert back to a threshold of 55 percent of the GDP if the bill sails through the National Assembly,” Asuna said.
She added that “by setting a debt anchor, we are committing ourselves to debt sustainability that conforms with guidelines set by the International Monetary Fund on Debt Limit Policy. This will help us to manage our debt more effectively and reduce the risk of default.”
Further, the draft seeks to harmonize the definitions of the term ‘Public Debt’ in the PFM act with its attendant Regulations to be consistent with Article 214 (2) of Kenya’s Constitution and to define ‘financial obligations’ as referred therein to guide the operationalization of the debt limit.
“Counties are allowed to borrow on the account of being guaranteed by the National Government making such loans public debts. We, therefore, seek to abolish the terms County Public Debt and National Public Debt, instead christen them as County Debt and Public Debt respectively,” explained Asuna.
According to data from the National Treasury, Kenya’s current public debt to GDP ratio is 61 percent, which is above the targeted limit of 55 percent. The budget deficit forced the government to borrow Sh.762 billion to finance its Sh.3.6 Trillion budget for Financial Year 2023/24.
The new debt anchor, Asuna assured, is envisaged to prioritize productivity in line with the government’s core pillars including agriculture, micro, small and medium enterprise, housing, and healthcare, digital and creative economy.
The National Treasury assured that there are robust strategies including reducing unnecessary expenditure, increasing revenue collection and pursuing sustainable debt financing options to facilitate the smooth implementation of the new bill.
By Robert Ojwang’
