National Treasury Cabinet Secretary Njuguna Ndung’u has faced scrutiny from members of the National Assembly’s Public Debt and Privatisation Committee over the breach of the Sh10 trillion debt ceiling established in June 2022 for the 2022/2023 Financial Year.
Committee Chair Shurie Abdi Omar expressed dissatisfaction with Ndung’u for failing to notify the House in advance when the government was on the verge of exceeding the established debt ceiling.
Omar insisted that the National Treasury should have promptly informed the House that the ceiling had been breached, attributing it in part to the depreciation of the Kenyan shilling.
“You should have told the House that it was not about borrowing but the exchange rate,” Omar asserted.
During his appearance before the committee, Ndung’u disclosed that as of the end of June 2023, the stock of the debt ceiling had reached Sh10.27 trillion. This total included external debt amounting to Sh5.44 trillion (52.9 percent of the total) and domestic debt of Sh4.83 trillion (47.1 percent of the total).
The National Treasury also faced criticism for not officially notifying the House of the debt ceiling breach. Kinangop MP Zachary Thuku Kwenya raised concerns, questioning why the National Treasury had not communicated to the National Assembly about the breach.
In response to the committee’s concerns, Ndung’u appealed to the MPs to collaborate in finding a solution and emphasized the importance of patience in addressing the issue.
A breach of the debt ceiling raises concerns about the sustainability of the country’s debt and its potential to become excessive. Excessive public debt can have various economic consequences, including diverting resources away from other government programs, limiting the ability to stimulate economic activity, and transferring wealth from the poor to the rich through increased taxes for debt repayment.
In June, the National Assembly approved the conversion of Kenya’s debt ceiling from a fixed amount (Sh10 trillion) to a percentage of gross domestic product (GDP), aligning with global best practices supported by the International Monetary Fund (IMF).
The new debt anchor was set at 55 percent of GDP in present value terms, with a window not exceeding five percent to accommodate the existing debt threshold of 60 percent of GDP. This adjustment implies that Kenya’s current debt level is already in breach of the new ceiling.