Treasury PS faults Auditor-General's public debt claims

Treasury PS Kamau Thugge during a Public Accounts Committee hearing on Anglo Leasing contracts at Parliament Buildings in Nairobi last year. Dr Kamau Thugge has faulted Auditor-General's assessment of the Kenya's public debt as unsustainable. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

In Summary

• The Auditor-General raised the red flag on the country’s growing appetite for borrowing, noting that Sh483 billion had been borrowed in one year only, and that the country was likely to experience financial stress when some of the loans mature.
• Dr Thugge said the country’s debt stands at Sh2.2 trillion, and that multi-lateral institutions classification of the country’s policy and institutional assessment in debt management capacity, ranked it at 3.9, which is among the best in sub-Saharan Africa.
• The PS said the country’s debt relative to exports stood at 47 percent, way below the 74 percent threshold, for a country to be classified to be in debt distress, or suffer unsustainable debt levels.
• MPs said the country was projected to pay debt at over Sh600 billion a year from 2019, and that the country was likely to experience financial instability.

By JOHN NJAGI
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Treasury PS Kamau Thugge Tuesday contested an assertion by the Auditor-General that the country’s debt level was unsustainable, and dismissed it as lacking any concrete evidence.

The PS went on to read to members of the Public Accounts Committee (PAC) of the National Assembly an opinion of the International Monetary Fund (IMF), which stated despite the country borrowing heavily to fund infrastructure development, it was still able to manage its debts.

On his part, the Auditor-General, had raised a red flag on the country’s growing appetite for borrowing, noting that Sh483 billion had been borrowed in one year only, and that the country was likely to experience financial stress when some of the loans mature.

“We note that the government has borrowed to the tune of Sh483 billion in one year only which puts the country’s debt levels at unsustainable levels and is likely to lead to financial stress when repayment starts in 2019,” said a representative of the Auditor-General’s office.

PUBLIC DEBT DEBATE

But the position of the auditor, which is an independent office, was contested by the Treasury PS, which apart from the IMF position, stated figures indicating the country was yet to exhaust the amount of debts it could accumulate.

MPs, most from the Opposition, were also critical of the government’s borrowing citing the Euro bond, among other heavy borrowing by the government to fund infrastructure development such as the construction of the Standard Gauge Railway.

Suba MP John Mbadi and his Balambala counterpart Mr Abdikadir Aden defended the Auditor-General saying it was an independent office and part of its mandate was to raise the red flag, when it was found that the public debt was unsustainable.

“From his position where he has access to all government books, the Auditor- General is at a vantage position to know about the sustainability of the country’s debt and report about it,” said Mr Mbadi.

RISING DEMANDS

Mr Aden said it was public knowledge that the country had soaked up a lot of debt, saying with rising demands on the exchequer, such as push for higher salaries by teachers, and the start of debt repayment in future, it means that the country would be in financial distress.

Dr Thugge said the country’s debt stands at Sh2.2 trillion, and that multi-lateral institutions classification of the country’s policy and institutional assessment in debt management capacity, ranked it at 3.9, which is among the best in sub-Saharan Africa.

The PS said the country’s debt relative to exports stood at 47 percent, way below the 74 percent threshold, for a country to be classified to be in debt distress, or suffer unsustainable debt levels.

PUBLIC DEBT THRESHOLD

“With the current debt levels, even if the economy failed to grow at the projected rate of five to six percent, and in fact grew at 3 percent, and even if the exchange rate to the dollar was to reach Sh120, the country’s debt would still be sustainable,” he said referring to stress testing of the country’s debt position.

The country’s debt to revenue ratio stood at 216, below the internationally acceptable threshold of 300.

The Treasury PS, who appeared before PAC to answer to audit queries on the Treasury raised by the Auditor-General Mr Edward Ouko in the last financial year, faulted Mr Ouko’s office and the MPs for declaring the country’s debt unsustainable.

SUSTAINABLE DEBT

He said for the country’s debt to be declared unsustainable, it had to be assessed for a period not less than 20 years, and not within one year after the Auditor-general had cited the country’s debt to have increased by 30 per cent.

Dr Thugge said it was the first time the country was constructing a Standard Gauge Railway, saying after the project was complete, the level of disbursements would decrease, and the country was unlikely to engage in heavy borrowing in future.

However, MPs said the country was projected to pay debt at over Sh600 billion a year from 2019, and that the country was likely to experience financial instability.