Public debt management in Kenya: an analysis of the Public Finance Management Act, 2023 on debt ceiling

Abstract

This study examines whether the shift from a nominal to GDP debt ceiling is a proper mechanism to ensure that public debt management is transparent, accountable and sustainable. The motivation for this research arises from the 2023 amendment to the Public Finance Management (Amendment) Act 2023, which replaced the fixed KSh 10 trillion nominal debt ceiling with a flexible threshold set at 55% of the Gross Domestic Product (GDP). This shift was intended to align borrowing limits with economic performance which has transferred significant borrowing discretion from Parliament to the Executive, raising concerns regarding executive discretion, parliamentary oversight and fiscal sustainability. To analyze these concerns, the study adopts a doctrinal and comparative legal methodology, evaluating the constitutional and statutory provisions governing public debt management. It further examines international best practices and comparative jurisdictions, specifically Botswana and Poland, which have implemented strong legislative measures. The study finds that the amendments to the Public Finance Management (Amendment) Act 2023 have weakened parliamentary oversight by allowing the Executive to unilaterally adjust debt levels with limited legislative scrutiny. Additionally, Judicial decisions have demonstrated the opacity in Kenya’s debt management, with courts finding that the Executive has failed to disclose critical debt information, thereby violating constitutional principles of transparency. These cases paint a broader picture of an Executive with extensive control over debt governance, raising concerns about the implications of this power shift under a GDP debt ceiling. Comparative analysis reveals that both Poland and Botswana have stronger legal safeguards. Poland employs a multi-tiered debt rule framework that triggers specific corrective actions when debt surpasses predefined levels, ensuring fiscal discipline. Similarly, Botswana mandates parliamentary oversight for all external borrowing and imposes strict debt caps, reinforcing fiscal responsibility. These measures contrast sharply with Kenya’s framework, where executive discretion remains largely unchecked, increasing the risks of unsustainable borrowing and fiscal mismanagement. Based on these findings, the study recommends strengthening parliamentary control over debt limits, enhancing public debt transparency through a centralized online portal and adopting a debt anchor policy with clear implementation frameworks. Ultimately, this study contributes to the discourse on public debt management by highlighting the risks posed by excessive Executive discretion in debt governance.