Treasury must seek Parliament’s approval for State Loan in move to tame excessive borrowing

The National Treasury. [Photo Courtesy]

In a new bill proposed to curb Kenya’s penchant for borrowing, the National Treasury will be required to seek Parliament’s approval for State Loans.

In a raft of proposals contained in the Public Finance Management (Amendment) Bill 2020 sponsored by Leader of Majority in Parliament Aden Duale, Treasury will expressly borrow money only for the budget that Parliament has approved.

Further, the National Assembly will have to approve the acquisition of monies for allocated loans which are approved by the National Assembly in a moved geared towards deflating the already ballooning wage bill.

In the recent past, the Jubilee government has come under sharp criticism from different quarters over the high rate of borrowing with pundits arguing that Kenya’s debts put the lives of posterity at risk of paying huge debts.

“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,” the bill reads on part according to Business Daily.

It adds: “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.”

Kenya’s debt as of August 2019, was nearly Sh6 trillion 62.3 percent of the gross domestic product. Much of this debt is owed to China which has funded mega infrastructural project among them the Standard Gauge Railway which is Jubilee’s flagship project.

The government in its defence, however, said money to fund infrastructural projects and can only be loaned while maintaining that Kenya can pay her debts.

Should the bill be adopted, the Treasury secretary will be required to pay outstanding debts using the proceeds of the loan directly to suppliers if the “loan is a government to government loan”.

Treasury anticipates that by 2024, Kenya’s debt will have hit Sh9 trillion, a figure the World Bank has expressed concerns over.