Parliament proposes law to have Treasury to seek approval from MPs when borrowing

In a bid to curb what has been described as borrowing spree by the government, a bill has been proposed requiring the state to seek approval from parliament for loans.

This looming restriction comes months after MPs approved the rise in the government’s debt ceiling to Sh9 trillion, to create room for more loans.

The Public Finance Management (Amendment) Bill, 2020, requires the national government to only borrow money for the budget approved by the National Assembly.

“The Bill further seeks to amend the Act to require the approval of the National Assembly on borrowing and guaranteeing of loans by the national government,” says the proposed law adding that, “in guaranteeing and borrowing money, the national government shall ensure that it’s financing needs and payment obligations are met at the lowest possible cost in the market which is consistent with a prudent degree of risk while ensuring that the overall level of public debt is sustainable.”

The allocations of loans will also be approved by the National Assembly.

Critics have accused the government of borrowing at a rate that will burden the taxpayers, as well as future generations with excessive debt.

Total public debt rose to 62.3 percent of the gross domestic product in June last year, the World Bank, having breached the recommended threshold 50 percent of GDP in the 2015/16 financial year.

However, the government defended the increased borrowing, arguing the country must invest in its infrastructure, including roads and railways.

If the law is adopted, the Treasury secretary will be required to disburse the proceeds of the loan directly to the suppliers, where the loan is a government to government loan and is raised for the purpose of financing goods and services provided by a supplier outside Kenya.

Kenya has been forced to confront the ballooning public debt after embarking on a borrowing binge in the past year to splurge on various infrastructure projects, including the standard gauge railway funded by China.

The government had to request approval to increase of debt ceiling to Sh9 trillion to prevent it from running out of funds during this fiscal year.

The move also allows the State to restructure the portfolio by replacing expensive commercial debt with cheaper funds from institutions like the World Bank.

The Treasury projects that total public debt will rise to Sh9 trillion shillings by June 2024.

The Bill is supported by Majority Leader Aden Duale.