Thugge says the auditor did not have information to ascertain the level of unsustainability and should stick to determining the levels of debt.
The Auditor General in the 2013/14 financial year audit report of the ministry had stated that debt increased by 27percent that year to Sh2.2 trillion.
“The Auditor General may not have the capacity to assess whether the debt stock is sustainable or not,” said Thugge.
The PS insisted Kenya was still way below the thresholds that help determine financial distress lamenting that the statement by the Auditor General would brand the country as a poor debtor.
He capped the country’s debt at slightly above Sh2.2 trillion stating that this should not raise alarm as there were various thresholds that had to be considered to ascertain the country’s unsustainability of debt.
“The heading is very misleading and if it comes from the auditor then it becomes international knowledge that the Auditor General thinks that our debt is unsustainable and there is no substance to back it up. It can be damaging even to our credit ratings, to the price we pay for borrowing… next time he can state the position of debt without going into the sustainability,” said Thugge.
He further acknowledged a growing concern by leaders over the current debt level and its sustainability owing to the increased rate of borrowing by the country, sentiments reiterated by Suba MP John Mbadi.
“We are borrowing too much, and probably we are engaging in too many investment projects at the same time and this is not sustainable for the country,” stated Mbadi.
Mbadi cited the loan that was used to finance various development projects among them the Standard Gauge Railway and which matures for payment in 2019 urging him to allay the fears that the country may undergo financial distress during the period.
Balambala MP Abdikadir Adan the acting Chair however came to the defence of the Auditor General saying he was in a better position to give the actual status because he knew the worth of the assets and the debts the government was committing to.
Several other MPs reiterated the chairman’s sentiments saying the Auditor General was the right man to raise alarm over the country’s financial situation because he was in-charge of reviewing how revenue collected had been spent.
“We should not vilify the auditor, he has done the right job. He is raising issues that… look, here things are not going on well here,” said Jackson Rop, the Vice chairman of the committee.
He said at the end of 2010, the external debt was 20 percent of the GDP and with additional project financing and moderate additional commercial financing the net value of public debt is projected to pick at 22 percent of GDP in 2016/2017 which was still way below the 50 percent indicative threshold.
He cited the threshold of debt distress in Kenya with regard to the value of debt to exports at 74 percent with the country having just hit the 47 percent mark.
“The net present value of our debt relative to revenue is 216 percent, the threshold for unsustainability is 300 percent – even if we do some stress testing, we are still below the unsustainability threshold,” he asserted.
The Council of Governors has also raised issue with the rate of borrowing and how it would impact the revenue collected as most would be diverted to pay up the debts since debt repayment plus interest is the first charge on the consolidated fund.
“While we take debt, we need to look at the future; we should have adjusted your budget ceilings upwards, because I tell you in future we will be in a crisis,” said Mbadi.
Central Bank of Kenya Governor Patrick Njoroge has in the past also expressed his concern over the country’s borrowing warning Treasury to reduce its high expenditure.
” We were concerned that the Central Bank and Treasury were talking a different language,” said Mbadi.
“If the Governor was here now, I would say the same thing,” said Thugge.