The Auditor General has declared that Sh215 billion from Kenya’s controversial Eurobond funds has not been accounted for, two years after the Government claimed the cash was allocated to ministries.
The finding comes in Government audit report, which shows that, contrary to claims that the funds were allocated to some ministries, there is no proof of “receipt of expenditure” of this money anywhere in government.
“Investigations into the receipts, accounting and use of funds related to the Sovereign/Euro Bond are still ongoing and the accuracy of the net proceeds of Sh215, 469,626,035.75 is yet to be ascertained,” says Auditor General Edward Ouko.
For instance, the report narrows down to the Ministry of Water and Irrigation, which was said to have received sh11.2 billion, but whose officials failed to show any documentation of receipt and expenditure. “The management has not provided any list of project(s) that were funded by the Eurobond proceeds.
In the circumstance, it has not been possible to confirm how the Eurobond funds were utilised,” states the report. As the country awaits the conclusion of the investigations, taxpayers will be required to pay Sh17.8 billion in interest payments on the Eurobond loan in the current financial year, the biggest single interest on a loan currently being serviced by the government.
And the Water Ministry’s failure to provide a list of Eurobond-funded projects or show proof of expenditure could reignite debate on what projects were actually funded by the borrowed billions, which Kenya is already repaying. The Government floated the Eurobond in June 2014 on the Irish stock exchange to raise money for infrastructure development in Kenya.
The flotation raised Sh250 billion. The essence of borrowing from the international markets was to lower interest rates in the country as envisaged by President Uhuru Kenyatta when he pushed for the Bond. Rates skyrocketed However, questions emerged when the Government returned to the local banks to borrow even as local interest rates skyrocketed.
Investigations by Parliament then revealed that the Government did not deposit the Eurobond proceeds in the Consolidated account, as required by law, but instead had first put the money in offshore accounts. In a previous audit report, Mr Ouko had noted that Sh199 billion was received on June 24, 2014 and deposited into an offshore account.
In its explanation, Treasury said it transferred Sh34 billion from the Sh199 billion that was sitting in the offshore account to the Exchequer Account to fund infrastructure projects. On the same day, July 3, 2014, another amount of Sh53.2 billion was withdrawn from the offshore account to pay a syndicate loan.
While the State graft watchdog, the Ethics and Anti-Corruption Commission, has since stated that the Sh215 billion whose whereabouts has yet to be explained was not stolen, the latest Auditor General report maintains that it was illegal for the Government to deposit any of the funds in the off-shore accounts.
The report indicates that the Government received $2 billion on June 24, 2014 and, contrary to the Public Finance Management Act, proceeded to spend some of it directly from the offshore accounts. It further indicates that out of the funds, $359,400,000 was moved to the Consolidated Fund on July 3, 2014 to fund infrastructure development. At the height of a public controversy over the Jubilee government’s handling of the Eurobond funds, the National Treasury said the “missing” cash was accounted for in the 2013-2014 financial year.
The ministry also stated that on the same day they moved $604,560,737.50 from the offshore account to pay a syndicated loan. Accordingly, the report says the Treasury documents show that at the end of the 2015 financial year on June 30, the remaining balance in the offshore account was $999,018,457.60 (Sh88,463,084,420.45).
However, these funds were moved on September 8, 2014, to a Sovereign Bond Deposits Account at the Central Bank of Kenya. The Government annex report quoted by the Auditor General shows that an additional amount from external borrowing of $815,436,932.00 (Sh73,805,196,715.30), being net proceeds from the tap sale, was also transferred on 17 December 2014 to the Sovereign Bond Deposits Account at the Central Bank of Kenya.
Curiously, Controller of Budget Agnes Odhiambo who had flip-flopped on the issue, says in her 2014-2015 report that the actual Eurobond figures in the Consolidated Account was Sh73 billion, which reinforces Ouko’s report, and could debunk her earlier claims that the funds were deposited in the Consolidated Fund.