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{
    "id": 1461462,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1461462/?format=api",
    "text_counter": 255,
    "type": "speech",
    "speaker_name": "Kitui Central, WDM",
    "speaker_title": "Hon. (Dr) Makali Mulu",
    "speaker": null,
    "content": "Following this increase, pension liabilities will thus amount to Ksh223 billion for the Financial Year 2024/2025. It will now constitute 6 per cent of the total expenditure or 2.3 per cent of the Gross Domestic Product (GDP), consistently becoming one of the Government's largest expenditure items. Pension expenditures have grown at an annualised rate of 21.3 per cent, since the Financial Year 2014/2015, when they stood at Ksh2.4 billion. This expenditure item keeps on increasing year in year out. The National Treasury indicated that the overall borrowing target was supposed to remain at the ratio of 45:55, meaning domestically, we borrow 45 per cent and externally, we had planned to borrow 55 per cent. To finance the fiscal deficit for Supplementary Estimates I, the indicated borrowing framework is currently estimated to cause a further increase of Ksh1.1 billion in net domestic borrowing. Further, Kenya should borrow an additional Ksh2.6 billion from the external markets. This means we are now shifting the ratios instead of the original plan of a 45:55 mix. It has now changed to a 53:47 mix. This means with the new supplementary budget, the Government targets to borrow 53 per cent domestically and 47 per cent externally. As you can see, the ratios have changed, and they have implications. The Committee observed a growing dependency on domestic borrowing. While recognising the constraints of current financing options. It is important to highlight that domestic debt servicing constitutes the largest portion of public debt servicing, representing 68 per cent of the total public debt servicing expenditures. This means that out of the total interest rate, we will pay about Ksh1.01 trillion. Sixty-eight per cent of that amount will go to service domestic loans. This means only 32 per cent will be servicing external loans. Consequently, an increased reliance on domestic borrowing indicates an elevated exposure to interest rate risks and refinancing risks. The Committee noted that the liquidity risk in the Financial Year 2024/2025 would have been mitigated if the Treasury Single Account (TSA) had been operational. This has been mandated by both the Cabinet and numerous House resolutions, but it is not operational up to now. The Treasury Single Account is essential for consolidating Government finances into a single account, facilitating budget execution, increasing transparency, and controlling expenditures. The Committee noted that the National Treasury did not provide a timeline for establishing a Treasury Single Account, resulting in a slow pace of implementation of this critical resolution. The Committee, in its Report, has made recommendations. We are very happy that Hon. Mbadi is now at the helm of the National Treasury. As you know very well, both of us have been pushing a lot of reforms in our financial sector. When I met him here yesterday after approval, I challenged him. I told him that God has now given him the opportunity we have all been looking forward to. I will keep reminding him of what we have always wanted to implement. Now, we have a person who appreciates and can implement some of the things we have been discussing all the time with Hon. Mbadi and the House as a whole. The recommendations we are pushing forward as a committee, the implementer is none other than Hon. Mbadi. We are happy he knows what we are saying. Recommendation No.1 is that within 30 days of the adoption of this Report, the National Treasury, headed by Hon. Mbadi, should draft an annual borrowing plan for the Financial Year 2024/25, pursuant to Section 63 of the Public Finance Management Act, 2012 and Regulation 186 of the Public Finance Regulations of 2015 of the same act. After that, the plan will be submitted to the National Assembly. The plan should also be published on the National Treasury website for transparency. This plan will guide us as a country regarding our borrowing plan and how we use our loans. Recommendation No.2 is that the National Treasury should develop an expenditure prioritisation mechanism before issuing the 2025/2026 Budget Circular so as to increase The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}