A report by the National Assembly’s Budget and Appropriations Committee cites an insatiable desire by the Treasury to borrow without putting in measures to repay or utilise the money properly as the basis for its action.
The report, which the National Assembly endorsed amid chaos related to election laws last week, limits government borrowing to Sh500 billion as opposed to Sh582 billion that the Treasury had proposed in its budget policy for 2017-2018.
Parliament is restricting government borrowing to Sh82 billion less than the National Treasury’s proposal in a bid to stop corruption and irresponsible spending.
“To reduce the deficit to a manageable level will therefore require this country to check its appetite for borrowing,” it says. “The committee is concerned that unlike in other countries in the region, this House does not approve new borrowing; instead, there is a set the threshold in the PFM (Public Finance Management) regulations.”
It was tabled three months earlier than usual to speed up budgetary approvals ahead of the August General Election.
It will now mean that, once approved by the Senate, these borrowing restrictions for development expenditure and personnel emoluments of the national government shall stand for the next two years.
The cap was arrived at, says the report, based on the need to intensify measures to reduce wastage in the public sector which is estimated at 10 per cent “and taking into consideration the low absorptive capacities in particular for externally funded projects”.
Rev Mutava Musyimi, who chairs the committee, told the House last week as he moved the motion: “The government must strive to check its tendency for corruption and control wastage, which we are witnessing.
“Significant resources have been invested in infrastructure and on improving the business environment. But we are not seeing efforts to widen the capital base. We are not putting serious and creative thinking to agriculture.”
The committee recommended that Parliament should pass a law to ensure any external borrowing is approved by the House to ensure all loan agreements fit within financial regulations and do not overburden taxpayers.
They endorsed the Budget Policy Statement and Debt Management Strategy tabled to restrict the Treasury from borrowing beyond 6 per cent of the GDP.