Director Martin Masinde says the amendment to the Public Finance Management Act seeking to cap the public debt to a nominal amount of Sh6 trillion will be in line with regional trends where there are no increased or reduced costs of borrowing in the medium term because fiscal balance is not surpassed.
The Parliamentary Budget Office says a Bill seeking to compel the government to seek parliamentary approval before entering into any loan will allow MPs room to control public debt which is spiralling out of control.
In their submission to the National Assembly Budget and Appropriations Committee, the PBO cautioned that four key public institutions used as guarantees are at risk of losing their assets if the government defaults on servicing outstanding government guarantees worth a total of Sh147.7 billion as at December 2018 that had been provided to eight institutions which increased from Sh133.79 billion from December 2017.
“National debt of stock also comprises debt guarantees under Article 213 of the Constitution and Section 58 of the PFM Act 2012. These form part of fiscal contingent liability i.e. if an institution fails make payments for a guaranteed loan it necessitates the government to step in and shoulder the extra-burden by use already limited financial resources,” read the PBO presentation.