Cap National Debt to GDP, Residents Support
Tuesday April 25, 2022
by Anne Sabuni
Residents of Nakuru County have backed plans by the National Treasury to cap the national debt as a percentage of the Gross Domestic Product (GDP), to encourage productivity.
The residents, who gave their views at the task force seeking views on amendments to the Public Finance Management Act, 2012, noted that the nominal figure of Sh. 10 Trillion was prone to manipulation with little regard to the productivity of the country, while the country continued to choke in debt.
National Treasury’s Public Debt Management Officer, Livingstone Bumbe noted that the amendments to peg debt to productivity will push for more productivity, given that the public debt was channeled to developmental expenditure.
He noted that the nominal number encouraged consumption whereas having the debt determined by the GDP will ensure that the country only borrows depending on its capacity to bear the burden hence growth.
“We borrow to fund developmental activities and capping it at 55 percent of the GDP means that if we want to borrow more, we need to grow our GDP so that our capacity to borrow grows,” added Bumbe.
The Treasury is seeking to clearly define public debt, noting the need to define the obligations with the counties having to carry their debt burden in the event that they occur in the future.
Nakuru East Deputy County Commissioner Simiyu Were, while calling on residents to give their input to the task force, noted that the public had been given more powers by the constitution that they needed to explore for better decision-making.
He noted that the public had different avenues through which they were to give their input on changes in the laws.
The Treasury also sought to have the law amended to have the Cabinet Secretary (CS) for Finance, submit a report in parliament, detailing why he was unable to maintain the debt at the required level.
“By allowing room for the CS to explain the breach of the regulations to Parliament, we will be working towards failure. This law should have finality and not create room for people to mess” noted Benson Asila, during a public participation forum in Nakuru.
Asila noted that the public debt burden was too heavy for the taxpayer to bear, urging the task force not to give room for more.
The amendments also seek to include financial obligations resulting from a public debt to also be charged on the consolidated fund unless the CS determines by regulation and approval of parliament to charge it on another public fund.