The government of Kenya intends to amend the finance law to allow the country to borrow money depending on its capacity to pay the debt.
Chair of the National Taskforce of the Public Finance Management Act (PFM) 2012 amendments and Head of Resource Mobilisation Department at the National Treasury Michael Kahiti said the changes seek to peg the public debt in relation to the country’s Gross Domestic Product (GDP).
At the moment, the government’s debt ceiling is set at Sh10 trillion by the national assembly. According to Mr. Kahiti, the limit does not reflect the country’s repayment ability.
“The limit is Sh10 trillion but the ceiling may not say much because it’s not anchored on the country’s ability to pay, the changes propose a rate of debt that the economy can sustain,” he said.
Speaking on Thursday in Machakos during the public participation for the proposed amendments, the chairperson of the task force said under the proposals the Cabinet Secretary for National Treasury would be required to appear before parliament in case the threshold for the borrowing exceeds. He would be required to provide a report on the causes and measures put in place to alleviate the situation.
Kahiti also noted that the changes would enable transparency and accountability in public finance management in addition to cushioning the economy from shocks.
“We are currently reeling from the effects of drought but under the new proposals the country will slow on borrowing during such situations and the national treasury will be required by the law to explain to the public the debt-carrying capital of the country,” added the chairperson.
