Senate adopts Treasury’s Sh9tr debt ceiling
Senate has adopted Treasury’s revised debt ceiling, pushing the economy into a debt-trap as the national government gets fiscal headroom to accrue an additional Sh3 trillion.
This comes after the Senate joint Committee on Delegated Legislation and Finance approved the National Assembly-seconded amendment to the Public Finance Management Act, 2012 that seeks to raise Treasury’s debt limit to an absolute Sh9 trillion.
But experts are quick to warn that without fiscal hygiene, the economy could head to the pillory and cause more pain to an already overburdened populace.
Genghis Capital senior researcher Churchill Ogutu said that although Treasury has until 2024 within which they can gobble up Sh3 trillion in debt, bad economic management can push the State on a borrowing spree.
Concessional loans
“We have some headroom until 2023/24 for us to hit the limit, but we cannot rule out fiscal indiscipline which can lead us to hit the limit before then,” he said.
He poked holes on Treasury’s plan to go for concessional loans, asserting that as a middle-income economy, there were no guarantees it will get them.
“Concessional loans are given to lower income countries and that train has left us unless the government wants to downgrade us. If we get concessional loans then the terms are going to be different,” said Ogutu.
In its final report to the National Assembly, lawmakers lobbied senators to appraise the ceiling highlighting the dire consequences on government spending.
“If the senate was to shoot down the proposed regulations, a crisis would occur where Treasury would have to cancel all of these projects and do a drastic cutback of the budget that have been allocated already to the Judiciary, National Assembly, Executive and the counties as there will be a huge deficit,” read the report in part.
