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{
    "id": 1169565,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1169565/?format=api",
    "text_counter": 194,
    "type": "other",
    "speaker_name": "",
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    "content": "Some of the key observations made by the Committee were as follows- (1) The ratio of debt to Gross Domestic Product (GDP) ratio is currently increasing, which indicates that it may not be sustainable in future. However, the National Treasury is optimistic that the Post-COVID-19 Recovery Programme supported by the International Money Fund (IMF) will increase the rate of growth of GDP, and therefore the ratio of debt to GDP will begin to decline going forward. (2) Economic factors, for example, a depreciating Shilling and increasing price levels, may pose challenges in the sustainability of debt both in the medium term and in the future. This is majorly caused by external forces and perceived artificial shortages of the Dollar. However, this is projected to stabilize since the country has enough foreign exchange reserves of up to five months import cover. (3) The instability of the Kenya’s debt accumulation process is not conducive for investors who prefer a predictable business environment and are scared of sudden fiscal changes to address debt problems. (4) Public debt is serviced out of Government revenues, of which taxation is a major source of revenues. Recently, the country has experienced increased tax rates partly arising from the IMF conditions. Growing the debt levels too fast may eventually result to increased taxes in the future. (5) The National Treasury has been slow in shifting to a higher ratio of cheap concessional debts in comparison to expensive commercial debts. (6) A high debt ceiling may give the National Treasury leeway to increase debt at a fast rate, leading to huge debts in the future and the challenge of high levels of debt is the increase in vulnerabilities in the event of shocks similar to COVID-19. The realized deficit has always been higher than the projected deficit and thus the deficit may continue to increase other than decline. The size of the deficit is driving the growth of public debt despite the fact that Parliament has the power to determine sustainable deficit levels. Madam Temporary Speaker, the Committee further observed that- (1) The National Treasury needs to put enough effort to build confidence with regard to public debt management and sustainability in the country. It was noted that the mere fear of non-sustainability makes non-sustainability a reality. (2) The new limit of Kshs10 trillion will be beyond the debt carrying capacity International Monetary Fund (IMF) /World Bank benchmark of 55 per cent for Kenya as at December, 2021. However, due to the post COVID-19 recovery programme supported by the IMF, the debt to Gross Domestic product (GDP) ratio is expected to decline towards the debt carrying capacity level in the medium term. (3) The National Treasury committed in 2019 that the debt ceiling of Kshs9 trillion will be enough after 2024. However, a number of unfavourable events have taken place that have led to the depletion of the ceiling. The events include the COVID-19 pandemic, Ukraine war and the resultant appreciation of the Dollar. (4) The deficit in the Budget Estimates for 2022/2023 and the medium term shall not be fully financed and development partners may stop funding ongoing projects if the debt ceiling is not increased."
}