How borrowing rules will change for new President – Business Daily
President-Elect William Ruto. PHOTO | SILA KIPLAGAT | NMG
The new President will first have to get Parliament to approve borrowing limits for the next financial year before considering the budget, in changes aimed at forcing the government to leave within its means.
This is after the outgoing National Assembly amended the Standing Orders to require parliament to determine borrowing limits for each financial year before approving the Treasury’s Budget Policy Statement.
The Standing Orders will for the first time require the House to consider the report of the committee on Public Debt and Privatisation of the Debt Management Strategy before the report of the Budget and Appropriations Committee (BAC) on the Budget Policy Statement can be debated by MPs.
The rules state that the resolution of the House on the report of the Public Debt and Privatisation committee on Debt Management Strategy shall constitute the House resolution on the appropriate limit on proposed domestic and foreign borrowing for the next financial year.
Currently, the Debt Management Strategy and the Budget Policy Statement are tabled before BAC for consideration.
The House amended its rules to establish the committee on Public Debt and Privatisation which will be tasked with scrutinising the Debt Management Strategy.
“The resolution of the House on the Debt Management Strategy shall be the appropriate limit on the proposed domestic and foreign borrowing for the next financial year and form a basis for the approval of the report of the Budget and Appropriations Committee on the Budget Policy Statement,” the rules states.
The Cabinet Secretary in charge of the National Treasury is required to submit to the House the Debt Management Strategy not later than February 15 every year.
The Debt Management Strategy shall include the total stock of debt as at the date of the statement, the source of loans made to the national government and the nature of guarantees given by the national government.
The strategy will also include the principal risks associated with the loans and guarantees, the assumptions underlying the debt management strategy and an analysis of the sustainability of the amount of debt, both actual and potential.
“Upon being laid before the House, the Debt Management Strategy shall be committed to the Public Debt and Privatisation committee,” the rules states.
The Public Debt and Privatisation committee is required within 10 days of the strategy being laid before the House to table its report for consideration.
The report of the committee shall include a schedule showing the stock of domestic and foreign public debt including guarantees as at the date of the statement, an evaluation of the sustainability of the amount of debt, the principal risks associated with existing loans and guarantees and a recommendation on the overall debt strategy for the next financial year and the medium term.
The committee is also required to make a recommendation on the appropriate limit on the proposed domestic and foreign borrowing for the next financial year and the following two financial years.
The Treasury in June successfully lobbied MPs to raise the public debt ceiling to Sh10 trillion to allow the State to borrow Sh846 billion to plug the budget deficit in the fiscal year that started on July 1.
President Uhuru Kenyatta’s administration has relied on loans that ballooned public debt from Sh1.89 trillion the Jubilee administration inherited from retired President Mwai Kibaki to a projected Sh8.59 trillion by end of the fiscal year ended in June.
The 12th Parliament failed to debate a State-backed Public Finance Management (Amendment) Bill 2022 that seeks to cap public debt at 55 percent of gross domestic product (GDP).
The Bill seeks to allow the State to breach the borrowing caps in the event of war, a health pandemic or natural disasters.
Had the Bill become law, the Treasury will have a free hand to breach the new debt ceilings as long as it can explain to Parliament what caused excessive borrowing.