Kisumu — The National Government plans to stop guaranteeing county governments' internal and external borrowing if the Public Finance Management (PFM) county regulations 2015 are amended.
The Director of planning in the resource mobilization department, Public debt management office directorate in the National Treasury and Economic Planning Monica Asuna said the changes in the regulations will allow county governments to deal with the consequences of external borrowing individually.
Asuna says the current regulations allow the counties to borrow as the national government plays the guarantor's role making it a public debt and not county debt.
"Currently, when the counties fail to pay their external debt borrowed through the blessings of the national government, it is the national government to pay that on their behalf," she said.
Speaking in Kisumu during a public participation forum on the proposed amendment, Asuna says the current regulations define debt as county public debt.
"We are seeking to harmonize the definition of public debt as per the constitution and as the regulations, taking into account that the constitution is the supreme law," she said.
Asuna says the public participation is, therefore, to change various sections, "to remove public from county debts so that we have county debts and not county public debts and also remove national and have public debts".
The counties will then have nowhere to lean to should they fail to repay the external debts.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
However, members of the public who attended the forum said the amendment will go against the "Bottom Up" approach that the current government campaigned on.
"Why is the government running away from its people, this is the platform this government used to win elections, why must the government abandon us in the counties if the county executive failed to repay these loans," said John Omwa.
The forum also debated on the government's intention to change finance law to allow the country to borrow money depending on its capacity to pay debt.
The government plans to move the debt ceiling from the current limit of no more than Sh10 trillion to a new debt anchor set at 55 percent of GDP in present value terms.
Asuna says the intention is in line with international best practice because the nominal figure of Sh. 10 trillion does not give the country a measure whether the country is at a critical limit or at a risk of default.
"As a percentage of GDP, it shows that we are at a critical limit or acts as a way of letting us know that we are surpassing the limit and what we are supposed to do," she said.
Currently, the debt to GDP stands at 62 percent, way above the international critical limit of between 50 to 55 percent.
"We want to amend so that we have, instead of Sh 10 trillion nominal figure, then we have debt anchored at 55 percent of GDP," said Asuna.
However, locals say the country will be at a loss if the GDP falls and went ahead to anchor its debt at 55 percent.
