The Senate yesterday gave the government the green light to raise Kenya’s debt ceiling to Ksh9 trillion, potentially plunging the country deeper into debt.
The vote means the National Treasury can now borrow up to Ksh2.5 trillion, in addition to the current debt of Sh6.5 trillion.
This would bring the indebtedness of every Kenyan to Ksh189,218. The country has 47,564,296 people, according to the just-released census results by the Kenya National Bureau of Statistics (KNBS).
The government sought to raise the ceiling after it hit its limit, but needed to borrow more to pay some of the loans that will fall due in the coming 12 months.
Previously, the country’s debt was pegged at a percentage of the Gross Domestic Product (GDP).
Economists say the move will give the government some breathing space to manage the existing debt “though that is just postponing the problem”.
“The government has simply shifted the terms of the debt by stretching the tenure of the loans,” Institute of Economic Affairs (IEA) executive director Kwame Owino said yesterday.
He added that the move would be positive only if the government takes cheaper long-term loans to pay the more expensive short-term ones.
He said the secret to the success of the decision lies in prudent borrowing and fixing leaks at the expenditure level.
According to Mr. Owino, the period by which the government can lengthen the expensive loans repayment can allow room for economic growth.
Mentoria Consulting chief economist Ken Gichinga welcomed the decision by the Senate, which he said saves the country from running out of funds during this fiscal year.
Mr Gichinga, however, advised acting National Treasury Cabinet Secretary Ambassador Ukur Yatani “to learn from the mistakes of his predecessors”.
“The minister should borrow and spend prudently. If he doesn’t, we can even hit the Ksh9 trillion debt ceiling before the end of the year,” Mr Gichinga said. He added that the decision is a hard sell due to the prevailing national outcry, but it has saved the country from defaulting on its financial obligations to domestic and international lenders.
However, Mr Gichinga blamed the National Assembly and Senate for being too lenient on the Executive by rushing to approve the raising of the debt ceiling without pushing for reforms.
“Parliament should have used this chance to rein in on the Executive by putting adequate safeguards to prevent unnecessary borrowing and ensure the prudent use of borrowed funds. Lawmakers should have given a conditional approval to raising of the debt ceiling,” he said.
Former Mandera Senator Billow Kerrow termed it a catastrophic decision.
“The country is already in a debt trap. For three or four years, we have been rescheduling our debts and borrowing to repay other loans,” he said, adding that a lot of the money borrowed has been wasted, with the parliamentary budget office flagging projects valued at more than Ksh1 trillion.
Though Genghis Capital Market analyst Churchill Ogutu applauded the move by the Senate, he said it was not the best way to deal with debt.
“By having an absolute figure instead of computing Kenya’s loans based on GDP, we would have a simplified way to monitor the ceiling. But, we have to walk the talk by restoring fiscal discipline,” he said.
Mr Ogutu challenged Parliament to strengthen its oversight role through adequate monitoring of the borrowed funds.
“The new debt ceiling will hit the country hard probably as from 2023. However, our fiscal indiscipline may mean the economic implications could be sooner,” he said.
Senators adopted the report even though the joint committee had expressed misgivings that the Ksh9 trillion ceiling would drop the percentage of equitable share due to servicing of loans.
Parliament was not let off the hook, with the experts saying the lawmakers have all along been cheerleaders as the Executive sank the country into a hole.
The Senate adopted the report of the Delegated Legislation and Finance and Budget Committees on raising the national debt ceiling.
Some 30 senators voted to amend the regulations while seven were against. The sitting was boycotted by a significant number of lawmakers.
Among those who voted against the amendment were Mutula Kilonzo (Makueni), Moses Wetang’ula (Bungoma), Aaron Cheruiyot (Kericho) and Nominated senators Milicent Omanga and Victor Prengei.
The seven were part of the joint committee and they submitted a minority report, which was appended to that of the majority.
Mr Kilonzo wanted Treasury compelled to give a justification for opening up the debt ceiling.
“We have not received any justification. Some people at the National Treasury think senators are zombies,” Mr Kilonzo said.
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