Treasury gets five years to trim debt to 55pc of GDP

The National Treasury building in Nairobi in this picture taken on March 15, 2023. PHOTO | DENNIS ONSONGO | NMG    

By EDWIN MUTAI More by this Author

The Treasury has five years to bring down the country’s level of debt to 55 percent of the Gross Domestic Product (GDP) after MPs approved the conversion of the

debt ceiling from the current Sh10 trillion to an anchor.

MPs Tuesday evening voted to approve the Public Finance Management (Amendment) Bill 2023 and now awaits President William Ruto to become law.

The Bill sets the threshold of the debt anchor of 55 percent of GDP in present value terms.

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The Bill further provides a window not exceeding five percent to accommodate the current debt threshold to GDP which stands at 60 percent.

The MPs deleted a clause in the Bill that sought to create a provision for the Treasury Cabinet Secretary to explain to Parliament should the Finance Ministry breach the debt anchor.

“The Cabinet Secretary shall, not later than five years from the date of the coming into force of subsections (2a) and (2c), take measures to ensure that borrowing by the national government complies with the threshold prescribed in subsection (2a),” Makali Mulu, the vice chairperson of the Debt and Privatisation Committee, said.

Mr Mulu moved further amendments to the Bill to require the CS to submit to the National Assembly by April 30 every year a report on the debt status and the borrowing undertaken by the national government indicating exceptional circumstances.

The debt committee will be required to consider the Treasury CS's report and table recommendations for consideration.

“The National Assembly shall discuss the report tabled by the Debt and Privatisation Committee and may pass a resolution to adopt it with or without amendments,” the changes read.

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President William Ruto’s Cabinet in March gave a nod to the National Assembly to change the debt ceiling from the current limit of no more than Sh10 trillion to an anchor set at 55 percent of GDP.

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