MPs have 12 days to pass laws to raise the debt ceiling to facilitate more borrowing, failure to which the government will be unable to plug the Sh846bn budget deficit.
In the event of a dispute between the two Houses on the Public Finance Management (Amendment) Bill 2022 and the proposed amendments to the Public Finance Management (National Government) Regulations of 2015, which will require 30 days to resolve, then Parliament will have run out of time.
The two Houses are set to adjourn sine die (without setting a date for resumption) on June 16, which means that MPs are left with 24 days to work. But, because MPs sit three days a week — Tuesday, Wednesday and Thursday — it means that they are left with 12 working days to pass the two sets of laws, which are critical to the financing of the Sh3.33 trillion budget.
The 2022/23 budget, unveiled in April by Treasury Cabinet Secretary Ukur Yatani, has a deficit of Sh846 billion that will be financed through borrowing from the local and foreign market.
What is giving the mandarins at the National Treasury sleepless nights is that the public debt currently stands at Sh8.6 trillion.
With the country’s debt ceiling set at Sh9 trillion as per the November 2019 amendment to the PFM (National Government) Regulations of 2015, it means that the government can only borrow up to Sh400 billion or risk violating the debt limit.
This leaves a Sh446 billion development budget that is not financed. To remedy the situation, the government published the PFM (Amendment) Bill 2022 that seeks to have the debt anchor in the law. It also proposes to give the Treasury cabinet secretary in a leeway to exceed the debt limit and only write to Parliament explaining circumstances that led to such. This dilutes the role of parliament in regulating what is to be borrowed by the national government each financial year.
The proposed amendments to the PFM (National Government) Regulations 2015, on the other hand seek to change the debt ceiling from a numerical figure of Sh9 trillion to 55 percent of the Gross Domestic Product (GDP) in net present value. The National Assembly Committee on Delegated Legislation that is considering the amendments to PFM regulations has already questioned the decision to have the two sets of laws considered at the same time.
“The regulations we are considering seek to implement the PFM Bill which, interestingly, has not been legislated. So how do we proceed from here, CS?” Committee Chairman Kassait Kamket (Tiaty) wondered during a meeting with Mr Yattani.
But Mr Yatani downplayed Mr Kamket’s fears, saying, the National Treasury had envisaged that MPs will pass the PFM (Amendment) Bill 2022 first before considering the regulations.
What is further compounding the frustrations of the National Treasury mandarins is that the two sets of laws must be passed first before the National Assembly approves the Sh3.33 trillion budget estimates currently before the House.
With questions on the legality of having the regulations before the Bill is passed raised, the National Treasury is in a difficult position. The two proposed laws require the input of the Senate and the National Assembly before they become legally binding.
In the event that the two Houses fail to agree, a mediation committee will be established to come up with a mediated version of the Bill. A mediation committee has 30 days to conclude its mediated version of the law, meaning that by the time the committee is concluding its work, parliament will have already adjourned.
In the event that the 30 days elapse without the committee agreeing on the mediated version, the Bill will stand lost and can only be introduced after six months—in the next parliament—throwing the government into a fix on how to finance the 2022/23 budget.
