Ruto Administration Breaks Ksh10 Trillion Debt Limit
Friday, June 30, President William Ruto’s administration exceeded a Ksh10 trillion debt limit set by parliamentarians for 2021.
According to reports, the country had borrowed a total of Ksh10,027 trillion, exceeding the legal limit without the consent of Parliament.
Even though there are clear indications that President Ruto has significantly slowed down on borrowing, there is no doubt that his administration must return to the House of Representatives and request an increase in the debt ceiling.
As a result, experts cautioned that non-procedural borrowing could soon tarnish Kenya’s international reputation, as some lenders typically require proof of procedural matters, such as institutional approvals from local authorities.
Tom Oketch, a Certified Public Accountant (CPA) and Economist told GossipA2Z that a lack of adherence to local procedures, such as the legal framework for international borrowing, could easily erode confidence in the government’s ability to manage its finances.
“International lenders’ confidence in a country’s ability to repay loans is based on several factors, including the country’s economic growth prospects, debt burden, and fiscal discipline, such as a legal framework for the loans,” explained Okatch.
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According to Okatch, the inability to adhere to procedures and legal framework could lead to conflict between Members of Parliament, who represent the people, and the Executive, the branch of government authorized to borrow on behalf of the nation.
If the government decides to disregard these frameworks, it could weaken the nation’s financial stability, leading to a poor track record of loan repayment.
If international lenders have faith in a country’s ability to repay loans, they are more likely to lend the country money at lower interest rates. This can help the nation grow its economy and improve its standard of living, as Okatch explained.
Julius Jombo, a Certified Public Accountant (CPA), told GossipA2Z that if international lenders lose confidence in a country’s ability to repay loans due to procedural issues such as ignoring local legal frameworks, they may be less likely to lend money to the country or charge higher interest rates.
This can make it more challenging for the country to expand its economy and raise its standard of living. In addition to adhering to local legal requirements, countries can do several other things to increase the confidence of foreign lenders.
“These factors include maintaining a high rate of economic growth, keeping the country’s debt burden under control, and adopting sound fiscal policies,” explained CPA Jombo.
Jombo explained that by taking these actions, Kenya can increase its chances of obtaining loans from international lenders on favorable terms, which can assist the country in achieving its economic development objectives.
Ruto Administration Breaks Ksh10 Trillion Debt Limit
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