MPs want government borrowing capped at 400 billion shillings a year

Parliament in the previous session. [Elvis Ogina, Standard]

MPs have proposed that borrowing in any financial year be capped at 400 billion shillings or 3.2% of gross domestic product (GDP).

In a report filed on February 15, the National Assembly’s Budget and Appropriations Committee said the country’s 846 billion shillings fiscal hole was likely to exceed the 9 trillion shillings debt ceiling.

“It is expected that by the end of June 2022, the outstanding debt will be 8.6 trillion shillings, which means that the only amount available for the next financial year without modification of the ceiling will be 400 billion shillings. shillings,” says the Fiscal Policy Statement 2022 report which covers the next three financial years.

“The committee therefore recommends that the overall deficit be limited to 400 billion shillings.”

Where the deficit of 400 billion shillings is high, the national treasury will only borrow an amount equivalent to 3% of GDP, or the total value of all goods and services produced in the economy.

The proposal, however, comes at a time when the Treasury has already written to the Clerk of the National Assembly expressing its intention to abandon the current statutory debt ceiling of 9 trillion shillings and adopt one indexed to GDP.

Instead, the Treasury wants to replace the ceiling with a medium-term debt-to-GDP anchor of 55% of GDP in present value terms, that is, discounting for a low interest rate.

In addition to capping the budget deficit at 400 billion shillings, the committee, chaired by MP Kieni Kanini Kega, has proposed a budget cap of 1.630 billion shillings for the national government.

The executive takes the lion’s share of this allocation, getting 1.56 trillion shillings, parliament 50.2 billion shillings and the judiciary 18.9 billion in the recommendation.

The fair share for the counties remains at 370 billion shillings.

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