Members of Parliament on Friday, March 10, moved to regulate the government's appetite to borrow money from both local and foreign markets.
Select Committee on Public Debt and Privatization of Parliament warned that unchecked borrowing would lead to distortion of economic stakes.
The Committee advised the government to consider incorporating the 2023 Medium Term Debt Management Strategy (MTDS) in their borrowing framework.
"In line with the fiscal consolidation path, the committee approves and sets a medium-term fiscal deficit target of no more than 4.4 per cent of GDP for FY 2023/24, 3.9 per cent of GDP for FY 2024/25, and 3.6 per cent of GDP for FY 2025/26," the Committee report read.
According to the 2023 Medium Term Debt Management Strategy (MTDS), the government was planning to borrow money in the next three years and use some of the proceeds to repay its debts.
Select Committee on Public Debt and Privatisation of Parliament noted that Treasury should, as a matter of urgency, implement the proposed policies so as to ensure that national debt does not exceed Parliament’s approved debt ceiling of Ksh10 trillion.
The Committee Chairman Balambala MP Abdi Shurie explained that sustainable debt management is crucial in avoiding overlaps that may place the economy into a sinkhole.
"Furthermore, the committee recommended that National Treasury submits a strategy for resolving non-performing loans associated with various State Owned Enterprises (SOEs), including Kenya Airways, within two months, and that the Office of the Auditor General expedite audits of project loans in the water sector and a Ksh9.9 billion loan borrowed on behalf of KPLC and submit a report to the House within the next two months," the report read in parts.
In particular, the MPs want Treasury Cabinet Secretary Professor Njuguna Ndung'u to comply with Article 201 of the constitution which regulates local and foreign lending engagements.
The Select Committee also recommended that the government conducts public participation before considering major borrowings.
"The committee recommended that the country’s borrowing strategy be approved at 50 per cent net external borrowing and 50 per cent net domestic borrowing, with any deviation requiring approval from Parliament," the report read in parts.
At the same time, the Select Committee underscored the need for Treasury to create a sinking fund for public debt servicing and implement foreign exchange risk hedging mechanisms to protect against shocks in external interest payments.
