Parliament sets rules to regulate the government’s appetite for borrowing
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Parliament issued recommendations on the 2023 Medium Term Debt Management Strategy to tame the government's borrowing
Parliament issued recommendations on the 2023 Medium Term Debt Management Strategy to tame the government’s borrowing.
The 2023 Medium Term Debt Management Plan (MTDS), which details how the government intends to borrow money and repay its debts over the following three years, has received recommendations from the Select Committee on Public Debt and Privatization of Parliament.
Abdi Shurie, a Balambala MP who chairs the committee, has recommended the National Treasury to implement a range of financial and policy steps to ensure sustainable debt management and prevent going over the KES 10 trillion debt ceiling authorized by Parliament.
The committee has advised the National Treasury to conduct public engagement on the MTDS in accordance with Article 201 of the constitution and to integrate the borrowing strategy presented in the Budget Policy Statement with the borrowing strategy in the MTDS in the upcoming budget cycle.
The proposed debt management approaches, such as the three-year rolling framework for deficit financing, should be the same from one MTDS to the next.
In order to eliminate unnecessary short-term domestic borrowing, the committee suggested that the National Treasury combine the banking arrangements for Ministries, Departments, and Agencies into a single treasury account system, as permitted by Section 28(2) of the PFM Act and PFM regulations.
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The committee also advised the National Treasury to employ foreign exchange risk hedging measures to guard against shocks in external interest payments and establish a sinking fund for servicing public debt.
The committee has also requested that all un disbursed loans totaling KES 1.179 trillion be reviewed, with a report submitted to Parliament within one month on terms, status, reasons for non-disbursement, and proposals on any loans that can be canceled to save money on commitment fees.
It stated that donor assistance should be coordinated with the country’s budget cycle in order to facilitate proper planning by implementing agencies and reduce un disbursed loans.
Furthermore, the committee recommended that National Treasury submit a strategy for resolving non-performing loans associated with various State Owned Enterprises (SOEs), including Kenya Airways, within two months, and that the Office of the Auditor General expedite audits of project loans in the water sector and a KES 9.9 billion loan borrowed on behalf of KPLC and submit a report to the House within the next two months.
In line with the fiscal consolidation path, the committee also approved and set a medium-term fiscal deficit target of no more than 4.4% of GDP for FY 2023/24, 3.9% of GDP for FY 2024/25, and 3.6% of GDP for FY 2025/26.
The committee recommended that the government’s borrowing strategy be approved at 50% net external borrowing and 50% net domestic borrowing, with any deviation requiring approval from Parliament.
The committee has requested that the National Treasury submit quarterly reports on public debt management to Parliament and make them available for public inspection on its website.
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