CS Yattani pleads with senators to increase public debt
National Treasury has pleaded with Senate to support the Executive in its bid to increase the national debt ceiling from the current Sh 6 trillion to Sh 9 trillion.
If Parliament does not approve Treasury’s request to change the law, then the government operations risks being grounded as it has already reached its borrowing limit.
Appearing before a joint Senate committee on delegated legislation and Finance and Budget on Tuesday, Treasury acting Cabinet Secretary Ukur Yattani told senators that the government is presently unable to allocate funds for development projects because of this limitation.
Yattani cited President Uhuru Kenyatta’s Universal Health Care (UHC), electricity and infrastructure as some of the projects that will be affected immediately.
“I appeal to you (Senators) to approve it. We have not thought about the options we have just in case you reject it, we will be doomed as a people,” he said when Kericho Senator Aaron Cheruiyot asked the CS what will happen in case the Senate rejects the proposal.
According to Senator Cheruiyot, the government should not form a habit of planning to spend what it does not have.
“Cabinet Secretary, we might be willing to accommodate you on the ongoing projects but borrowing to start fresh projects will not be allowed,” he warned.
The National Treasury in a letter dated October 15, 2019, requested the senate to consider and approve the amendment to the Public Finance Management (National Government) regulations 2015 section 26 (1) (c) .
CS Yatani wants regulation 26(1) be amended by deleting the words “50 percent of Gross Domestic Product (GDP) in net present value terms”.
Kenya’s total loans reached Sh6 trillion in August after the country borrowed Sh200 billion more in two months but in the latest move treasury wants to increase the debt ceiling by some Sh3 trillion more than the law currently permits.
Previously, the debt ceiling has been pegged at 50 percent of the Gross Domestic Product (GDP), but a fortnight ago Members of the National Assembly amended the Public Finance Management (PFM) Regulations as proposed by Treasury to substitute it with Sh9 trillion.
Yesterday, Yattani told the joint committee co-chaired by West Pokot Senator Samuel Poghisio and his Mandera counter, the new target in numerical limit will provide clarity in terms of controls and real-time oversight mechanism on the growth of public debt and safeguard public debt at sustainable levels as per the Constitution.
In addition, he said the amendment to the law will allow the government to borrow money to pay off expensive loans and take those ones with longer repayment periods and lower interest rates.
“We are doing this in good faith because we are getting to very dangerous levels, if we don’t borrow more money. We have to take on the bull by its horns and not sweep matters under the carpet, we see a dead end,” he noted.
He reiterated that the 2019/2020 budget which was passed by Parliament cannot be implemented fully at the moment has it faces numerous trials.
However, Bungoma Senator Moses Wetangula disagreed insisting that if allowed to go on with the current trend, will overburden the future generation with debt “given the appetite of borrowing in the last six-year by Jubilee administration”
“Your right to borrow must be equal to your ability to pay. Borrowing should be shared by the current and future generation,” Wetangula told the CS.
He added, “The government should not push to borrow amounts that are unreasonable, unmanageable and unsustainable,”
On the other hand, Makueni Senator Mutula Kilonzo Jnr held that he expected the National Treasury to be more persuasive in asking for the borrowing limit to be increased with convincing reasons that give no doubt.
“You need to convince us, why you want us to allow you to borrow Sh3 trillion more. You cannot ask for our approval just like that, never CS,” he noted.
In his defense, the CS explained that Parliament will have a say as it will be the one approving all borrowings even when with an increase the in debt burden limit.
“When borrowing is managed well, it is not a bad thing, as long as the debt levels are sustainable,” Yattani said.