By Billy Mijungu
Suspension of the Debt Anchor & Reinstatement of a Debt Ceiling
The debt anchor is beneficial for a growing economy, but in an economic downturn, meeting revenue targets becomes difficult, leading to higher debt distress.
A fixed debt ceiling provides a clear borrowing limit, reducing fiscal risk and ensuring sustainable debt levels.
Zero-Based Budgeting (ZBB) & Expenditure Alignment with Revenue, Zero-Based Budgeting ensures every expenditure is justified from scratch rather than based on historical allocations.
Aligning expenditures strictly with revenue helps avoid fiscal deficits and ensures efficient allocation of resources.
Consolidation of Revenues & Loans in the Exchequer
All government revenues and loans must be deposited in the Consolidated Fund before expenditure authorization.
The Controller of Budget (CoB) should oversee withdrawals to enforce transparency and accountability.
Mandatory Parliamentary Approval for Government Borrowing
All government loans must be subjected to Parliamentary approval to ensure proper scrutiny of:
▶️ Nature of the loan (concessional vs. commercial).
▶️ Ownership & conditionalities (hidden clauses, collateralized assets).
▶️ Repayment structure (impact on future budgets).
Strengthening Foreign Reserves to Reduce Exchange Rate Volatility
Increasing foreign exchange reserves strengthens the local currency and reduces reliance on external borrowing.
A strong reserve position lowers the cost of external debt servicing, making foreign-denominated loans cheaper.
Strategies to boost reserves:
▶️ Encouraging Foreign Direct Investment (FDI) and remittances.
▶️ Promoting exports through value addition.
▶️ Optimizing diaspora remittances via incentives and efficient banking channels.
Reducing unnecessary imports to protect forex reserves.
These measures will enhance fiscal discipline, debt sustainability, and economic resilience while reducing exchange rate risks.
