Kenya's debt burden has been a subject of concern for years, with the country's total stock of debt standing at Sh8.4 trillion as of March 2022, just Sh600 billion shy of the Sh9 trillion mark.
On May 26, Treasury Cabinet Secretary Ukur Yatani issued a gazette notice raising the debt ceiling from Sh9 trillion to Sh10 trillion, citing the need to shift to an anchor of 55 per cent of GDP in net present value (NPV) terms.
According to the notice, the public debt shall not exceed Sh10 trillion, a move that has been met with mixed reactions from lawmakers and economists.
Initially, the National Treasury had proposed changes to the Finance Act that would have allowed it to bypass lawmakers in its borrowing plans, a move that was seen as a threat to parliamentary oversight.
However, with the changes, the MPs will now be left to play the role of rubber-stamping borrowing decisions already made by the government, a move that has been criticized by some as undermining the role of Parliament.
As of June 2021, Kenya's debt to GDP in net present value (NPV) terms was at 59 per cent, surpassing the legal threshold of 50 per cent.
The move has been defended by the Treasury, which has insisted that pegging public debt to GDP is an international best practice and part of the Extended Fund Facility (EFF) and the Extended Credit Facility (ECC) with the International Monetary Fund (IMF).
Interestingly, the government has with the IMF, stating that the credibility of the new framework will anchor expectations for all stakeholders around the government's intended debt reduction path.
