An open debt policy will cushion us from economic distress

It has been said more than once, and it is now almost a truism that the Kenyan Parliament has been sluggish in flexing its oversight muscles. The provisions on Parliament’s role in the Constitution of Kenya 2010 are so robust but remain unexploited. A perfect case study for this impotency is the current state of the country’s economy. Kenya’s debt portfolio is in distress under the watch of Parliament and the worst thing about the whole situation is that the legislature appears to be unprepared to effectively respond.  

Regarding the situation of public debt distress, how did we get there? During the pre-2010 constitutional dispensation, the Executive had an immense role in public finance management and in most instances, Parliament would only be required to approve the Executive’s decisions. Fast forward to the post-2010 constitutional dispensation, the legal framework vested critical powers in Parliament as far as public finance management is concerned. In recognition of Parliament as the representative and the guardian of citizens, the drafters of the 2010 Constitution through Chapter 12 elevated Parliament over the Executive on matters of public finance. Notwithstanding the presence of an overly permissive legal framework for Parliament’s oversight, the powers lie idle in executing its mandate to reign in on unsustainable public borrowing.

Article 95 of the Constitution gives Parliament the powers to share revenue, approve the budget and oversight executive expenditure. This role is so powerful to the extent that the executive can only suggest fiscal moves to parliament. Parliament can advise, alter, or approve the budget policy statement. The budget as a planning tool, in many ways indicates the shape that a country’s fiscal policy may take. This then presents us with the elephant in the room - an ever-ballooning public debt in Kenya.

When Parliamentarians approve consecutive budgets with a huge deficit, and ever-consistent shortfalls in local revenue collection, then this means the government will be forced to borrow to meet its financial obligations. The issue here is not so much about borrowing but the role of Parliament in ensuring sustainable debt. From the onset, Parliament has failed immensely to ensure sustainable public debt. The law mandates Parliament to provide a borrowing threshold that is guided by international standards and one that should not exceed 60% of GDP. At the whim of the Executive, Parliament has been adjusting the public debt ceiling to a figure that is not arrived at by assessing our macro-economic reality. Coupled with a tradition of debt opaqueness, this is one of the major reasons why we are in a state of distress.

The drafters of Chapter 12 on public finance and its attendant statutes introduced an open debt policy that has not been adhered to date. This is despite how, when it comes to borrowing, Article 211 puts Parliament at the top of the hierarchy, to prescribe the terms of borrowing and even to impose reporting requirements. Under this role, Parliament is expected to know who the lender is, how much the executive is borrowing, the purpose for borrowing, how it will benefit citizens and more importantly be briefed regularly on the debt portfolio. Following the spirit of the Constitution, on citizen involvement in government decision-making processes, there should be public participation before a loan is borrowed.

Unfortunately, the ghosts of the pre-2010 era still persist and for this reason Parliament is only used as a conveyer belt. Our debt portfolio is surrounded by mysteries, borrowing is a one man show contrary to Kenya’s constitution. The entire process is executive-driven and it is not surprising that our parliamentarians are unaware of the country’s debt status. Parliament has ceded its power of oversight and economic management to the executive.

The authority to ratify loans was given to Parliament with a reason - to stop the executive from imprudent borrowing. When left with all powers (as things are currently) the executive will amass unnecessary debts that could leave the economy in limbo. The consequence will be corruption through misappropriation of the borrowed funds, expenditure rising than revenue, generation imbalance and finally a limping economy.

There have even been claims that the executive hoodwinks Parliament by tabling falsified documents. For instance, in the budget policy statement the deficits are indicated to be lower than they actually are. This tomfoolery is also extended to the supplementary budget which is passed in a rush, hence less scrutiny.

Parliament ought to seriously execute its constitutional mandate and save from Kenyans from a worsening public debt crisis. The first bold step is by operationalizing the open debt policy which is envisioned by the Constitution. Can we, in the future, expect a public participation forum the next time the government is borrowing?

Posted by Loise Mwakamba on April 21, 2023

Categories:  Parliament Oversight   open debt policy   public debt