The Cabinet Secretary (CS) for National Treasury and Economic Planning, Prof. Njuguna Ndung’u has proposed the amendment of the Public Finance Management (PFM) Act 2012 and the attendant regulations to replace the current numerical debt ceiling of Ksh 10 trillion with a debt ratio of 55 percent present value of the Gross Domestic Product (GDP).

During a brainstorming session with the Committees on Budget and Appropriations, Public Debt and Privatization, and the Departmental Committee on Finance and National Planning, Prof. Njuguna Ndung’u noted that section 26 (1) of the PFM Act (National Government) Regulations amended in 2022 provides that the National Public Debt shall not exceed Kenya Shillings Ten Trillion.

While interrogating the CS, the legislators were keen to know how the Ministry of National Treasury and Economic Planning is managing Kenya’s public debt, even as they sought to know the projected impact of the proposed new policy to the economy.

A section of the  lawmakers averred that it were better if the National Treasury were to explore the calculation of the debt ceiling based on the revenue collected.

In his response, Prof. Ndung’u told the legislators that with a borrowing headroom of only Kshs. 610Billion against a projected fiscal deficit of Ksh. 720Billion for the FY 2023/24, the country has to adopt a practical debt management policy. 

He further told the Committee that the proposed debt anchor framework conforms with the international best practices in settling debt limits and provides for debt sustainability. He noted that the suggested framework would also allow Parliament to tighten its grip on public debt management .

Faced with a barrage of questions demanding a justification for the proposed framework , Prof. Ndung’u  told the legislators that going forward, he had elected to hold several engagements with the three committees, to have them understand the new framework so they would become his ambassadors once it is tabled in the House for consideration.

Nairobi, 28th April, 2023