Accountants call for reduced borrowing to check public debt

The Treasury building in Nairobi. Treasury plans to take commercial loans totalling Sh83.3bn in next fiscal year. PHOTO | FILE  NATION MEDIA GROUP

By John Gachiri

Accountants have joined groups advising the government to slow down borrowing as the public debt rapidly piles up.

The Institute of Certified Public Accountants of Kenya (ICPAK), the sector umbrella group, urged the government to especially reduce domestic borrowing to avoid crowding out private firms.

“Contain the stock of debt to a sustainable level of about 40 per cent of GDP in the medium term so as to allow sufficient access to credit by the private sector, which is necessary for driving economic recovery,” said ICPAK chairman Fernandes Barasa.

The recommendation was made at the ICPAK annual budget seminar held on Wednesday in Nairobi.

Kenya’s public debt stands at Sh2.4 trillion, which is 46 per cent of the general economy, but analysts at Fitch Ratings say financing the massive investments projects that are coming up could push the debt level to more than 50 per cent of GDP.

Fitch said increased borrowing could jeopardise Kenya’s rating which would in turn increase its borrowing costs.

READ: Fitch concerned over Kenya, Uganda aggressive borrowing

ICPAK said the Treasury should speed up tax reforms which would increase revenue collection now targeted at Sh1.358 trillion.

“To maximise on the ongoing tax reforms, there is need to fast-track the enactment of tax legislations such as the Tax Procedures Bill and review of the Income Tax Act,” said ICPAK’s statement.