Treasury seeks public’s input on borrowing target

DEBT: National Treasury has invited the public and various stakeholders to give their input concerning the government’s plan to amend the debt ceiling from the current numerical standing to a debt anchor.

The inputs should reach the Treasury by end of this month. The amendment, if approved by parliament, will now allow the current administration to increase borrowing based on Kenya’s economic performance.

This means that it will create more space for President William Ruto’s administration to borrow money beyond the current limited headroom, which is seemingly a backtrack from Ruto’s tough talks on ensuring the country lives within its means.

“National Treasury invites interested members of the public to submit written comments and or inputs/memoranda on the aforementioned guidelines and amendments,” Cabinet Secretary Njuguna Ndung’u (pictured) said in the public notice.

If passed, Kenya’s debt ceiling will now be pegged on a debt anchor of 55 per cent set at debt to gross domestic product (GDP) in the present value term, a deviation from the current numerical number of the Sh10 trillion debt ceiling. The rush to amend the ceiling comes at a time when the Treasury is battling confusion on how it will borrow Sh133.1 billion to finance the Sh3.64 trillion budget in the next fiscal year.

Proposed budget

In the revised proposed budget, the national treasury increased the borrowing targets to Sh720.1 billion to seal the budget deficit against the Sh587 billion borrowing space that is legally available at the moment.

The difference or the Sh133.1 billion overrun is caused by the fact that Kenya’s debt is projected to hit Sh9.41 trillion by end of June 2023 against the Sh10 trillion debt ceiling, meaning as it stands, the borrowing headroom is slimmer than the targets. Now, should this new direction flop, the treasury could be forced to inflict more austerity measures to slash the proposed budget by the Sh133 billion that was to be borrowed.

The cabinet has since approved the debt anchor proposal awaiting a parliamentary nod before finally undergoing public participation.

But the parliamentarians are fretful that the new metric could enable careless borrowing and ‘mischief’ through wrong estimation of the country’s economic performance.