The National Treasury and Economic Planning of Kenya has proposed to amend its debt law by removing the current ceiling of 10 trillion shillings (about 73.64 billion U.S. dollars) and replacing it with a new measure based on the gross domestic product (GDP) for efficient budget deficit and debt management.
The proposal seeks to introduce a debt anchor pegged at 55 percent of the GDP, which will allow more borrowing to finance the budget deficit. “By putting a debt anchor, we will manage our debt in a sustainable manner that conforms with guidelines set by the International Monetary Fund on debt limit and reduce the risk of default,” said Monica Asuna, the director of Planning at the National Treasury and Economic Planning.
Kenya’s debt stock stood at 68 billion dollars at the end of January, and the proposed amendment aims to enable the country to meet its debt obligations and finance its budget deficit. If the law is not changed, the ministry would have to write to Parliament every time the threshold is exceeded, according to Njuguna Ndung’u, the cabinet secretary for the National Treasury and Economic Planning.
The proposed amendment is currently undergoing public participation before it is forwarded to Parliament for debate and passage into law. On April 18, Kenya kicked off a plan to raise funds in the international market through a sovereign bond in the financial year 2023/2024, which is expected to raise the public debt stock. The money raised would be used to offset a 2-billion-dollar Eurobond that would be done in June 2024.
