Treasury loses Sh3bn annually on interest

The government is losing up to Sh3 billion annually paying interest to commercial banks after borrowing its own money.

It has emerged that much of the money the government borrows from banks to finance its projects is from fixed accounts of parastatals, meaning the government is actually paying the massive interests on its own money.

“Basically, we are borrowing government money lying idle in commercial banks and paying interests for it,” admitted the Treasury’s accountant-general, Mr Bernard Ndung’u.

The Treasury has subsequently hired two audit firms to find out exactly how much money is in government accounts.

Mr Ndung’u said the government paid monthly interest of at least Sh200 million for the money borrowed.

“It is for this reason we hired two consulting firms to get government’s true cash position,” he said. The audit will be finished at the end of this month.

NO LEGAL PROVISIONS

It also emerged that the Treasury had no legal provision for reverting the money in state corporations’ accounts to the Exchequer or channelling it to other areas of priority, forcing it to borrow from commercial banks. Although the exact figure is not known, the idle money is believed to be in billions.

“We know there is a lot of money lying idle in different agencies. We cannot tell you the exact figure until the audit is complete.

“When we are in a crisis, we end up borrowing money. Ideally, we are borrowing our money and paying interest on the same,” said Mr Ndung’u.

The situation will, however, be reversed following the launch of a new framework on financial reporting that will herald radical changes in the way government uses cash.

Treasury Cabinet Secretary Henry Rotich said the new rules would see the creation of a Treasury Single Account for all government agencies, unlike in the past, when money would be wired to specific accounts.

“Money is now in one pool and we disburse it as and when they need it,” he said.