Parliament could raise the debt ceiling to Sh10 trillion to enable the government to borrow more to finance its ambitious budget, the Nation has established.
In a gazette notice of May 26, National Treasury Cabinet Secretary Ukur Yatani wants MPs to amend the Public Finance Management (national government) Regulations, 2015, to increase the limit, which is Sh9 trillion.
This would give them room to borrow more to finance the Sh3.33 trillion budget for the 2022/23 financial year.
The PFM amendment regulations were tabled in the National Assembly yesterday and committed to the House’s Delegated Legislation Committee chaired by Tiaty MP Kassait Kamket for consideration, which includes public participation, before reporting to the House.
The regulations Mr Yatani wants reviewed were enacted three years ago and will only finance the 2022/23 budget and the medium term.
“Regulation 26 of the PFM (national government) regulations, 2015, is amended by substituting it with the provision that the public debt shall not exceed Sh10 trillion,” the gazette notice reads.
This means that the government has abandoned the proposal to change the debt ceiling from a numerical figure of Sh9 trillion to 55 per cent of the Gross Domestic Product (GDP) in net present value.
This came after it became difficult for MPs to agree during the conferment process of the draft PFM regulations, what exactly are reasonable terms of the GDP, considering that the country is at a debt GDP ratio of 64 per cent.
The 2022/23 budget, whose highlights were unveiled in the National Assembly on April 7, has a deficit of Sh846 billion.
With the ceiling at Sh9 trillion and the public debt at Sh8.6 trillion, unless the limit is expanded, the government may not be able to finance its budget as it can only borrow up to Sh400 billion.
What is likely to cause Mr Yatani sleepless nights is that increasing the limit can only be done with the concurrence of the Senate and the National Assembly. The National Assembly will adjourn sine die (with no appointed date for resumption) on June 9 ahead of the August 9 elections.
A motion to have the calendar reviewed by a week to June 16, the same day as the Senate is expected to adjourn, was quietly withdrawn after a section of the members threatened to shoot it down.
The proposal came from Speaker Justin Muturi, who had argued that because Parliament is the duality of the two Houses, it would be improper for one House to adjourn, while the other was still in session. The regulations must be passed in the National Assembly and sent to the Senate for concurrence.
The two Houses must undertake the necessary approval measures, such as conducting public participation on the proposed amendments.
The government has also published and submitted to Parliament for consideration the Public Finance Management (PFM) (Amendment) Bill 2022 to have the debt anchored in the law.
The Bill, currently before the Finance and National Planning Committee, proposes to give the Treasury Cabinet Secretary the leeway to exceed the debt limit and only write to Parliament afterwards. MPs are, however, uncomfortable with this provision as it dilutes their role in regulating what the government borrows each financial year.
“Provided that if at any time the public debt exceeds the limit and the regulations, the Cabinet Secretary shall provide parliament with a written explanation and provide a time-bound remedial plan,” the PFM (Amendment) Bill 2020 states.
The Bill lists the circumstances that may lead to the breach of the limit. They include depreciation of the shilling, significant balance of payment imbalances or abrupt fiscal disruptions. The fiscal disruptions have been listed as war, pandemics or natural disasters. It is not clear why the two sets of laws are coming at the same time.
While the PFM regulations seek to implement the provisions in the Bill, the application of the Statutory Instruments Act of 2013 is that the PFM Bill gets the priority so that the regulations can follow later.
In the event that for instance, the two Houses fail to agree on the PFM Bill 2022, a mediation committee will be established to come up with a mediated version. Such a committee has 30 days to conclude its work, meaning that by the time it’s done, Parliament will have adjourned.
In the event that the 30 days elapse without the committee agreeing on a mediated version, the Bill will be abandoned and can only be reintroduced after six months.
