Budget office urges the Senate to reject Sh9tr debt cap to shield counties
The Parliamentary Budget Office (PBO) has advised the Senate Finance Committee and the Delegated Committee to reject the changes contained in the Public Finance Management (PFM) Act 2015 setting the debt ceiling at Sh9 trillion.
PBO advised Senate that failure to reject the changes passed in the National Assembly within 15 sitting days after its submission, the House shall be deemed to have approved the regulations as provided in Section 205 of the PFM Act.
The committee heard that the changes made in the PFM Act would have an impact on the amount of cash county governments would receive from the exchequer.
Joash Kosiba, Principal Fiscal Analyst at PBO, said by the end of September 2018, Kenya’s debt stock had reached Sh5.6 trillion, but if no policy interventions of the PMF Act were put in place, the debt would hit Sh6.5 trillion at the end of 2019 and probably Sh8 trillion by 2020.
Loan repayments
“Going by the way the State is borrowing, debt will become detrimental to counties. There will reach a time when very little will be provided to devolved units because locally-generated revenue will be committed to repaying loans while the remaining bit goes to recurrent budget,” he said.
Kosiba explained that the funds set aside for the county governments have been on the decline from 23 per cent in 2013 to 11 per cent in 2019 due to increased payment of interest on loans.
“Out of the funds received from the exchequer currently, 23 per cent goes to debt servicing, six per cent goes to pension and 53 per cent to recurrent budget, thereby leaving only 18 per cent for development,” he said.
