An Act of Parliament to amend the Public Finance Management Act, 2012.
| PROPOSED PROVISION FOR AMENDMENT | PROPOSED AMENDMENT | OUR COMMENTS |
|---|---|---|
| Clause 2 Amendment of section 2 of No. 18 of 2012 | The Public Finance Management (hereinafter referred to as the “principal Act”) is amended in section 2: a. in the definition of “County Public Debt”, by deleting the word “public”; and b. by inserting the following new definitions in their proper alphabetical sequence: “financial obligation” in relation to public debt, includes outstanding amount of actual current liabilities that require payment of principal, interest, fees, commissions and expenses by the government; “public debt” has the meaning assigned to it under Article 214 (2) of the Constitution. | For the proposed definition of “public debt”, the clause seeks to align the principal Act with Article 214 of the Constitution. The proposal is sensible as “public debt” applies to all financial obligations attendant to loans raised or guaranteed as securities issued or guaranteed by the national government. |
| The proposed definition of “county debt” will apply to loans or securities guaranteed by the county government. |
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For the definition of “financial obligation”, the Bill seeks to provide clarity by providing a definition to a term that has not been defined in the principal Act. |
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Clause 3 Amendment of section 12 of No. 18 of 2012 | Section 12 of the principal Act is amended: a. in subsection (1) (b), by deleting the word “national” wherever it appears; and b. in subsection (2), by deleting paragraph (b) and substituting thereof the following new paragraph: “(b) ensure proper management and control of, and accounting for the finances of the government and its entities in order to promote the efficient and effective use of budgetary resources;” | The proposals in this clause seek to provide for the proper management and efficient use of budgetary resources by the national government and its entities. |
Clause 4 Amendment of section 15 of No. 18 of 2012 | Section 15 of the principal Act is amended: a. in subsection (2), by deleting paragraph (d) and substituting thereof the following new paragraph: “(d) public debt and financial obligations attendant to loans raised or guaranteed and securities issued or guaranteed are maintained at a sustainable level as advised by the Public Debt Management Office and approved by Parliament for the national government and by the county assembly for county government”. b. In subsection (4), by deleting the words “national debt” and substituting thereof the words “public debt”. | In the Business Daily newspaper published on 27th June 2023, it was indicated that Parliament adopted a report by the Public Debt and Privatisation Committee that removed the proposal to give the Public Debt Management Office (“PDMO”) power to advise Parliament on public debt. Consequently, it would be prudent to delete the proposed paragraph (d). |
The proposal in subsection (4) seeks to align the principal Act with Article 214 of the Constitution. |
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Clause 5 Amendment of section 31 of No. 18 of 2012 | Section 31 of the principal Act is amended in subsection (2) by deleting the words “national debt” and substituting thereof the words “public debt”. | This proposal seeks to align the principal Act with Article 214 of the Constitution i.e., the Constitution defines “public debt” and not “national debt”. |
Clause 6 Amendment of section 50 of No. 18 of 2012 | Section 50 of the principal Act is amended: a. in subsection (2): i. by deleting the words “a limit” and substituting thereof the words “set threshold”; ii. by inserting the following proviso at the end of the sentence: “Provided that if, at any time, the Cabinet Secretary is unable to maintain the public debt threshold as required under this subsection or the Regulations made thereunder, the Cabinet Secretary shall submit a written report to Parliament explaining the cause of the breach on the threshold and provide a time-bound remedial plan.” b. by deleting sub-section (6) and substituting thereof the following new sub-section: “(6) A public debt and resultant financial obligations incurred by the national government is a charge on the Consolidated Fund, unless the Cabinet Secretary determines, by Regulations approved by Parliament, that all or part of the public debt and resultant financial obligation is a charge on another public fund established by the national government or any of its entities”. | This is a good proposal as it mandates the Cabinet Secretary to give Parliament a written explanation where the public debt exceeds the threshold set out in law and the remedial plan. |
Clause 7 Amendment of section 63 of No. 18 of 2012 | Section 63 of the principal Act is amended by inserting the following new paragraph: “(i) advising Parliament and the Cabinet Secretary on the sustainable levels of public debt and the annual borrowing limit”. | We propose the deletion of this clause as Parliament adopted the report of the Public Debt and Privatisation Committee to not give the PDMO power to advise Parliament on public debt. This was stated in the Business Daily newspaper of 27th June 2023. An argument has been made that the deletion of this clause will safeguard the oversight role of Parliament as provided in the Constitution. |