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Yatani in fresh push to raise debt cap as deficit hits Sh1 trillion

Yatani in fresh push to raise debt cap as deficit hits Sh1 trillion

National Treasury and Planning CS Ukur Yatani during an interview on December 22, 2020, at National Treasury offices Nairobi. The National Treasury has embarked on a fresh bid to raise the debt ceiling from the current Sh9 trillion that was set by Parliament in October 2019.

Treasury CS Ukur Yatani said the statutory debt limit has to be expanded to cater to the budget deficit in the financial year 2021-22 and the preceding years.

In the 2021 Medium Term Debt Management Strategy before Parliament, Treasury says the country’s debt remains sustainable but risks to sustainability have increased.

The ministry said debt indicators are expected to improve with efforts towards fiscal consolidation and the global economy recovering from the Covid-19 shocks.

“Implementation of this debt management strategy may require the revision of the debt ceiling, based on future borrowing requirements,” Yatani told MPs.

The country is technically broke, with the virus taking a hit on revenue streams that are yet to rebound amid global travel restrictions and curfews.

Debt service—principal and interest payments—will cross the Sh1 trillion mark in the next financial year.

Kenya’s debt stock was Sh7.12 trillion as of September 2020—accounting for 79 per cent of the Sh9 trillion ceiling.

The amount has grown on account of pressure to fund infrastructure and debt servicing at the height of dwindling revenue generation.

The Parliamentary Budget Office said the trend is projected to continue over the medium term owing to planned projects and Covid-19 response stimulus packages.

The budget experts warned that even though the stock of debt stock is considered sustainable, other sustainability indicators show otherwise.“Following the impact of the Covid-19, the outlook forecast is expected to worsen with a possibility of breaching all the thresholds in the medium term,” PBO said.Debt is projected to reach Sh7.8 billion this financial year, with the budget deficit projected to be over Sh1 trillion.Although the Treasury is yet to declare the official cap it intends to present to MPs, word is that it could be Sh12 trillion.The ministry, in its call to MPs, said inflation, fluctuating exchange rates, and high-interest rates pose risk to revenues and expenditures.It held that depreciation of the exchange rate may positively impact custom related revenues; raise debt service costs, and fiscal risks. Following the impact of the COVID-19, the outlook forecast is expected to worsen with a possibility of breaching all the thresholds in the medium term The alarm is that more than half of the total […]

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