Jubilee trading with Eurobond cash, claims Raila

Mr Odinga said this was part of what he described as a looting spree by officials within the government which, he added, had contributed to the economic troubles the country was experiencing.

The Opposition leader stopped short of stating that Kenya was headed the Greek way – into a debt crisis – but warned that urgent measures were necessary to prevent a deeper mess.

“I think we have not been here in many years and the nearest we came to this was in the 1990s when even donors were withdrawing during the Goldenberg crisis. The government resorted to printing money. We have not gone the Greek way yet but the signs are there,” he said.

He was referring to the crisis triggered by the Goldenberg scam, the biggest financial scandal in Kenyan history, when the Kanu government reacted to the withdrawal of donors by launching a fictitious gold export scheme, which cost the economy billions of shillings.

In a wide-ranging interview with the Sunday Nation, Mr Odinga said the Youth for Kanu ’92 group — referring to a group of young politicians who campaigned for Kanu in 1992 — was now in charge.

“The YK 92 team has now graduated. The URP wing is on to scandals like land and kickbacks for contracts. The TNA wing is more sophisticated. They go for things like the Eurobond with which they have traded in international stocks to make Sh34 billion and are waiting for the fledgling Kenya Airways and such deals like the Mombasa Port,” he said.

“We are back to the days of cowboy contractors where tenders are inflated for the sake of over ‘over-stealing’.”

BE HONEST
Treasury issued a robust response to Mr Odinga’s claims, dismissing them as far-fetched.

Treasury Cabinet Secretary Henry Rotich said: “All proceeds from the Sovereign Bond were accounted for and this position was confirmed by the Auditor-General who, in his report for 2013/14, noted that he did not qualify my audit opinion on the basis of this matter due to the fact that the balance of actual net proceeds from the Sovereign Bond is correctly reflected in the Off-shore Account and in the Central Bank of Kenya Special Account.”

Mr Rotich said part of the funds were used to retire old Kenyan debts and that Sh196.92 billion had been released to various government ministries, agencies and departments for infrastructure projects.

“Some of the projects have been completed while others are on-going. The on-going projects will be completed in due course,” he said.

Mr Odinga has, however, disputed these assertions and asked the government to come clean on the maintenance of foreign accounts to keep the Eurobond funds.

The Opposition leader regretted that the massive Lamu port initiative known as the Lapsett Corridor project, which was started under the Grand Coalition, was now in limbo.

He charged that private citizens were benefitting more from President Kenyatta’s frequent trips abroad — when they accompany him as part of a business entourage — and suggested that this was probably happening at the expense of national good.

In a withering broadside, Mr Odinga charged that President Kenyatta’s government had become highly inefficient and that their borrowing spree and unsound economic policies would hurt the country.

“Uhuru is mortgaging the country day by day. He needs to ask himself, is his best good enough or does he need to listen to other people,” Mr Odinga said.

He spoke in the same week that the Controller of Budget, Ms Agnes Odhiambo, raised troubling questions about the use and whereabouts of Sh176 billion, which was part of the total borrowed from Europe last year.

Ms Odhiambo said the proceeds from the Eurobond were 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.

From State House, President Kenyatta declared last year that the Eurobond will “stop government borrowing from domestic markets, thereby helping drive down interest rates which will boost investment, spur economic growth and provide growth to our people”.

One year down the line, bank interest rates are at their highest in several years and the government is facing a cash crunch.

This week, 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.

INFRASTRUCTURE PROJECTS
When the Government floated the Eurobond, President Kenyatta 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.

The President also promised that it would reduce domestic borrowing to keep interest rates at manageable levels.

Contrary to the pledges made by the government when the bond was being issued, the Parliamentary Budget Office said the Eurobond 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.

But Mr Rotich has insisted the use of the money was above board. He has previously said that the money was “correctly reflected” in government accounts but has been at pains to explain why the intended effect — a reduction in interest rates and domestic borrowing — was not arrived at.

In the interview, Mr Odinga said Jubilee had ignored the National Economic and Social Council, which was set up under the Grand Coalition government.

It comprised economic and governance experts from around the world and from local institutions and research centres in order to tap their knowledge.

“It is sad that the last NESC meeting is one that I chaired as Prime Minister. One needs to listen to other people and gain from experiences from around the world,” said Mr Odinga.

He then waded into the teachers’ pay crisis and said the government must pay up as ordered by the courts.

The problems teachers were suffering, Mr Odinga said, would directly affect the quality of education and negatively affect the future of children.

“Demoralised and demotivated staff do not perform. The quality is going to slump because it’s at its slowest,” said Mr Odinga.  

OVERSTRETCHING RESOURCES
He further criticised Jubilee for what he termed irresponsible borrowing and said that the government was overstretching the available resources since they were not managing finances prudently.

“If you are borrowing for infrastructure you must have an element of grant and long term repayments, and taking into consideration your current commitments. You should negotiate so that your contribution is low. If you don’t calculate how to repay, how will the economy grow?” said Mr Odinga.

“You also need to look at the tax bracket because the moment the taxes are too high, you punish existing businesses and scare away investors.”

Mr Odinga characterised Jubilee as a government that is “big on talk”.

“They talk big all the time. When you listen to (Deputy President William) Ruto it is as if he has been cramming somewhere. Where are the 10,000 kilometres of roads they promised? How were they going to finance it? It was an impossible promise that maybe only an economy as big as China can deliver. Where is the 5,000 megawatts of electricity and yet all of the geothermal projects they have commissioned are the ones we started in the Grand Coalition government?” said the Cord leader.

BIG ON TALK

Mr Odinga then addressed the International Criminal Court question and said the prayer rallies Jubilee leaders were conducting were nothing more than a circus.

He said the call to have him testify at The Hague on Mr Ruto’s behalf was insincere.

“It’s very irresponsible to try to use ICC to settle scores, making allegations that I’m responsible and saying that I should testify. I mean, Ruto was part of me. We were injured and we wrote to the Security Council to report that the government was killing its own people in Naivasha, Kisumu, Kericho, Kakamega and elsewhere. We couldn’t have fixed Ruto. If I had concocted evidence, it would have been against Uhuru and Kibaki,” he said.

“Actually it’s very unfair that Ruto and Sang are the ones now bearing the burden for the violence. As a country, we should find ways of dealing with these things and that is why I had advocated for a local tribunal,” he added.