Sh53bn of Eurobond cash used to pay off bank loan, MPs told
Controller of Budget Agnes Odhiambo. FILE PHOTO | DIANA NGILA |
What you need to know:
- Testifying before the National Assembly’s Public Accounts Committee (PAC), the controller said Sh53.2 billion was withdrawn from the account and used to pay a loan without her approval.
- The revelation comes at a time when the National Treasury has admitted that it has been facing a cash crunch and has proposed measures to cut down expenditure, including limiting foreign travel and freezing some accounts.
- With the Government planning to issue yet another Eurobond to stem the current financial crisis, the Controller of Budget asked Parliament to enact a law to guide the management of such funds.
The controller of budget on Thursday raised troubling questions about the use and whereabouts of Sh176 billion borrowed from Europe last year.
Ms Agnes Odhiambo said the money from the Eurobond was deposited in an offshore account over which she had no power.
Testifying before the National Assembly’s Public Accounts Committee (PAC), the controller said Sh53.2 billion was withdrawn from the account and used to pay a loan without her approval.
It is not clear how the balance of Sh122.8 billion was spent or whether it is still in the account.
Ms Odhiambo revealed that the National Treasury operates several special accounts. Key institutions whose mandate is to deal with public funds are kept in the dark about how the accounts are run.
SPECIAL ACCOUNTS
She also warned that pending bills were piling up in government and could reach levels last seen in 2002.
The pending bills at the time were one of the challenges that the Rainbow administration under President Mwai Kibaki had to deal after winning the 2002 election.
Ms Odhiambo had appeared before PAC to explain the whereabouts of the billions of shillings which the government received after floating the Sh176 billion loan which was equivalent to $2 billion at last year’s exchange rate.
“The Controller of Budget does not approve withdrawal from the special account and that’s where the National Assembly can come in and help develop legislation on the management of these special accounts,” she said.
The revelation comes at a time when the National Treasury has admitted that it has been facing a cash crunch and has proposed measures to cut down expenditure, including limiting foreign travel and freezing some accounts.
Ms Odhiambo said Parliament needs to change how the government runs special accounts because under the current law, her office only authorises withdrawal of money held at the Exchequer Consolidated Fund Account at the Central Bank of Kenya.
Kenya floated its first sovereign bond in June last year, meaning that there was about Sh123 billion left after the loan taken from Citibank, Standard Chartered and Barclays Bank was paid.
Ms Odhiambo said the remainder is transferred into the CBK whenever it is needed but she has complained to the Treasury about the payment of the loan and the fact that not all of the remainder of the Eurobond money was deposited in Kenya.
“I do not know the number of special accounts there are but Treasury needs to shed light on how many and how they are operated. I know there are certain special accounts where donations and grants are paid into,” she told the MPs.
ENACT LAW
With the Government planning to issue yet another Eurobond to stem the current financial crisis, the Controller of Budget asked Parliament to enact a law to guide the management of such funds.
She said among the questions MPs need to ask the Treasury was whether the money in the special account earns interest and where that interest is paid.
She also asked MPs to address the pending bills so that they don’t become monstrous like those the Kibaki administration was faced with when it took over power in 2003.
“Why commit when you don’t have the resources? This is also being done at the county level,” she said.
When the Government floated the Eurobond, its said Sh34.8 billion would be used to fund infrastructure projects while another Sh87.92 billion was to be factored into the 2014/2015 Budget.
Contrary to the pledges made by the Government when the bond was being issued, the Parliamentary Budget Office said the Eurobond had had no impact in stabilising the exchange rate.
“With respect to interest rates, the intended reduction in the borrowing rates has not been felt. The 91-day Treasury Bill rate reduced slightly in August 2014 after the bond was issued in June 2014 and stabilised until May 2015 when an upward trajectory was witnessed. This indicates that the sovereign bond did not have a huge impact on the domestic borrowing by the government,” the Budget Office said in a brief prepared for PAC.
Treasury Cabinet Secretary Henry Rotich was scheduled to attend yesterday’s meeting but opted for the Energy, Information and Communication Committee, provoking the ire of Mr Nicolas Gumbo, the PAC Chairman.
“I understand that he has gone to other meetings where he was verbally invited yet we wrote our letter to him nine days ago. These are important matters of fiscal policy,” said Mr Gumbo. The committee resolved to give Mr Rotich another opportunity to honour the summons.
