Treasury is dishonest about debt situation, MPs say

Parliament now warns that the high debt levels could widen the country's fiscal deficit. [Wilberforce Okwiri, Standard] By Frankline Sunday

Parliament has criticised the National Treasury for the rising debt levels, warning that the country could soon default on other pressing recurrent payments.

Parliament has further accused the Treasury of presenting inconsistent figures in policy documents detailing the country's debt position in regard to both the local and external debts.

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This comes days after the National Treasury said it had procured another Sh200 billion line of credit via the issuance of a second Eurobond facility.

"The refinancing needs of debt maturing in one year in 2018/19 will reach 54.4 per cent (Sh1 trillion) of total revenues due to repayment of syndicated loans, commercial loans, international bonds, and domestic debt payments falling due in the 2018/2019 financial year," said Parliament's Budget and Appropriations Committee on Monday. Kenya's external debt has risen from less than Sh1.5 trillion in 2014 to over Sh4 trillion as at the end of the current financial year.

Parliament now warns that the high debt levels could widen the country's fiscal deficit. This, coupled with depressed revenues from agriculture, tourism, and manufacturing, could see the Government run out of money. Tax measures This could push Treasury to either introduce new tax measures resulting in a higher cost of living for consumers or cut back on recurrent spending, thereby affecting public services.

Parliament has also flagged a discrepancy between the figures in the Treasury's Budget Policy Statement (BPS) and the medium-term debt statement (MTDS).

"While the BPS proposes to finance the deficit through external financing to domestic financing ratio of 37 per cent to 63 per cent, the MTDS utilises a ratio of 57 per cent external financing," states the Parliament report.

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In addition, the medium-term policy statement puts the level of commercial debt at 22 per cent of total external borrowing, adding up to Sh116.9 billion. In the BPS, the same figure is posted as being more than double, at Sh288 billion.

Last week, the International Monetary Fund said Kenya exhausted its $1.5 billion (Sh150 billion) precautionary facility last June pending renegotiation for new terms of the crucial facility that acts as an insurance policy against global fiscal shocks.