CoB calls for fiscal discipline as public debt surges past set limit

The Controller of Budget Dr Margaret Nyakang’o has raised concern over ballooning public debt.

Nyakang’o in the National Government Budget Implementation Review Report for the first three months of the Financial Year 2024/2025, she said public debt stock as at September 30, 2024, stood at Sh10.79 trillion (67 per cent of the GDP).

The debt comprised Sh5.19 trillion due to external lenders and Sh5.60 trillion due to domestic lenders.

The Controller of Budget noted that the public debt stock increased by 2 per cent from Sh10.58 trillion as of June 30, 2024, to Sh10.79 trillion. External debt as per the report increased by 0.3 per cent, while domestic debt recorded 4 per cent growth attributable to more borrowing in the domestic market.

Section 50 (2) of the PFMA 2012 states that the National Government may borrow money under this Act or any other legislation and shall not exceed the limit Parliament sets. Parliament set the public debt ceiling at 55 per cent of the Gross Domestic Product. The Budget Review Outlook Paper 2024 indicates that Kenya’s GDP was Sh16.11 trillion as of June 30, 2024.

“The public debt stock, therefore, surpassed the authorised public debt limit. The Controller of Budget recommends a reduction of budget deficit financing through fiscal consolidation to contain the increase in public debt,” stated the Controller of Budget.

Nyakang’o recommended that there be a reduction of budget deficit financing through fiscal consolidation to contain the increase in public debt.The allocation towards servicing the public debt in the FY 2024/2025 amounted to Sh1.91 trillion, revised to Sh1.91 trillion in Supplementary Budget I.

The total expenditure on Public debt during the first three months of FY 2024/2025 as per the report amounted to Sh325.52 billion compared to Sh345.43 billion recorded in a similar period FY 2023/2024.

Further, the report indicated that the National government spent Sh151.00 billion on employee compensation.

Total current transfers to other government institutions were Sh135.20 billion and subsidies were Sh23.37 billion. Other expenses with huge expenditure were Sh6.95 billion for security operations, Sh3.58 billion for travel, Sh2.21 billion for specialised suppliers, and Sh2 billion for school examinations invigilation.

COb noted that the reduction of ministerial development and recurrent budget through Supplementary Estimate following the withdrawal of the Finance Bill 2024 and a high level of public debt that may derail the implementation of planned development projects hampered effective budget implementation.