Treasury asks MPs to raise debt ceiling to 10 trillion shillings
The Treasury has asked MPs to raise the public debt ceiling to 10 trillion shillings to allow the state to borrow 846 billion shillings to cover the budget deficit for the fiscal year beginning July 1.
Treasury Cabinet Secretary Ukur Yatani has published a notice in the Official Gazette seeking to amend Section 26 of the Public Finance Management Act 2015 to raise the debt ceiling, even as he has pushed for a separate bill to amend the Public Financial Management Act to change the debt ceiling to a percentage of GDP from the current ceiling.
Lawmakers raised the debt ceiling to 9 trillion shillings from 6 trillion shillings previously in October 2019.
“In accordance with the provisions of Section 50(2) of the Act, the public debt shall not exceed ten trillion shillings,” Mr Yatani said in a May 26 legal notice.
ALSO READ: The next president will spend 3.7 billion shillings a day on his debts
The raising of the debt ceiling comes just two months after Majority Leader Amos Kimunya successfully pushed through an amendment to Fiscal Policy Statement (PBS) 2022/23, directing the Treasury to amend the law to take into account account of the larger budget deficit.
The House had in February reversed a recommendation from the Committee on Budget and Appropriations (BAC) that limited borrowing for the coming financial year to 400 billion shillings, in a bid not to exceed the legal limit as debt is expected to cross the 8.6 trillion shillings mark. in June.
The House instead retained the 846 billion shillings proposed by the Treasury in BPS 2022/23 with an addendum that the Treasury will table amendments proposing a higher limit by June for approval.
ALSO READ: Debt repayment exceeds state operating expenses
Parliament is also expected to debate the state-backed Public Financial Management (Amendment) Bill 2022, which will cap public debt at 55% of GDP.
It will also allow the State to cross borrowing ceilings in the event of war, health pandemic or natural disasters.
The Treasury will have a free hand to breach the new debt limits as long as it can explain to Parliament what caused excessive borrowing if changes to the law are approved.