President William Ruto’s administration on Friday, June 30, breached a Ksh10 trillion debt limit set by Members of Parliament in 2021.
Reports indicated that the country had borrowed a total of Ksh10.027 trillion, cleverly exceeding the ceiling without the legal approval of Parliament.
Even though there are clear indications that President Ruto had significantly slowed down on borrowing, it was no doubt that his government needed to return to MPs and seek adjustments to the country’s debt ceiling.
As a result, experts warned that unprocedural borrowing could soon taint Kenya’s international records since some lenders normally demand evidence on procedural matters including local institutional approvals.
Economist (CPA) Tom Oketch noted that the country’s failure to adhere to local procedures including the legal framework for international borrowing could easily lead to a loss of confidence in the government’s ability to manage its finances.
“International lenders’ confidence in a country’s ability to repay loans is based on a number of factors including the country’s economic growth prospects, debt burden and fiscal discipline such as a legal framework for the loans,” Okatch explained.
According to Okatch, the inability to follow procedures and legal framework could lead to mention between Members of Parliament who are people’s representatives, and the Executive which is the arm of government allowed to borrow on behalf of the country.
“If the government decides to overlook these frameworks, it may weaken the country’s financial stability which will then lead to a poor track record of repaying loans.
“If international lenders have confidence in a country’s ability to repay loans, they will be more likely to lend money to the country at lower interest rates. This can help the country grow its economy and improve its standard of living,” Okatch explained.
Weighing in, Certified Public Accountant (CPA) Julius Jombo explained that if international lenders lose confidence in a country’s ability to repay loans due to procedural matters like overlooking local legal frameworks, they may be less likely to lend money to the country or may charge higher interest rates.
“This can make it more difficult for the country to grow its economy and improve its standard of living. There are a number of things that countries can do to boost international lenders’ confidence apart from adhering to local legal guidelines.
“These factors include maintaining a high rate of economic growth, keeping the country’s debt burden under control and adopting sound fiscal policies,” CPA Jombo explained.
Jombo explained that by taking these steps, Kenya can increase her chances of getting loans from international lenders at favorable terms, something that can help the nation to achieve economic development goals.
