On May 26, 2022, Treasury Cabinet Secretary Ukur Yatani quietly raised the national debt ceiling by Ksh1 trillion, bringing the total to Ksh10 trillion.
The increase was made possible by exploiting provisions of the Public Finance Management (National Government) (Amendment) Regulations, 2022, which amended Regulation 26 of the Public Finance Management Regulations Act (2015).
According to a Special Gazette notice, the debt limit increase was intended to help finance the budget deficit of over Ksh400 billion.
Finance expert Nicholas Gachara, CEO of Somakazi, expressed concerns that the increased debt ceiling could have both positive and negative effects on the country's finances.
"Debt is double-edged, if it is going to be used for development then that would be a good debt. If it will be used to meet recurrent expenditures like civil servants' salaries, then it becomes a bad debt," Gachara stated.
He warned that the long-term effect of increasing the debt ceiling could increase the cost of living, as the government may resort to increasing taxes to offset debt.
"I am worried because going forward, Kenya may find it difficult to pay the international debt especially if we are going to go for dollar-denominated loans," Gachara added.
