Treasury faces scrutiny over Sh220 billion excess borrowing

The government has surpassed its approved borrowing limit by Sh220 billion in the current financial year, raising concerns about economic stability.

Treasury Principal Secretary Chris Kiptoo disclosed this overrun during a session with the Finance and National Planning Committee, attributing it to delays in foreign financing.

“As of yesterday (Thursday March 6) , we had borrowed Sh624 billion from the local market. This is due to delayed foreign financing,” Kiptoo informed the committee, led by Molo MP Kimani Kuria.

“We expect to live within our means with the the approved deficit,” The PS added.

The National Assembly had set a domestic borrowing ceiling of Sh761 billion for this financial year.

Initially, the government intended to borrow Sh263.2 billion locally, but this amount was later increased by Sh141.4 billion after the rejection of the Finance Bill, 2024, which had projected an additional Sh344.3 billion in revenue to support the Sh3.992 trillion budget.

Legislators expressed concerns that the increased domestic borrowing could limit credit availability for the private sector and worsen the nation’s debt situation.

They also questioned the Treasury’s commitment to reducing public debt and following its own policies, which emphasize concessional borrowing to minimize costs and risks.

The 2024 Budget Policy Statement, approved by Parliament, states, “Commercial borrowing sources will be utilized as a last resort to fund the fiscal deficit and repay maturing external debts.”

It further emphasizes maximizing concessional loans and limiting non-concessional borrowing to projects that cannot secure concessional financing and align with the government’s Bottom-Up Transformation Agenda.

Kenya’s revenue collection has been declining, with revenue as a percentage of GDP dropping from 18.1% in the 2013/2014 financial year to 14.3% in Financial Year 2022/2023.

At the same time, government spending has continued to rise, leading to increased borrowing to cover the budget deficit.

The National Assembly’s Budget and Appropriations Committee has previously warned that excessive domestic borrowing could impact credit availability for the private sector.