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Why the math doesn’t add up in Eurobond saga

Friday October 30 2015

Controller of Budget Agnes Odhiambo. The Controller of Budget is the gatekeeper of the Exchequer account. FILE PHOTO | DIANA NGILA |

Controller of Budget Agnes Odhiambo. The Controller of Budget is the gatekeeper of the Exchequer account. FILE PHOTO | DIANA NGILA | NATION MEDIA GROUP. 

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To get to the bottom of the Eurobond saga, you start by going to Article 206(I)A of the Constitution.

And, as we all know, the Constitution is the supreme law of the land.

It follows that the article above is the supreme financial management law when it comes to dealing with national government revenue.

Any breach of this section of the Constitution is tantamount to breaking the highest public financial management law.

Simply, the article says that all national government revenues must be paid into the Consolidated Fund — also known as the Exchequer account.

As with all good laws, the framers of the Constitution provided circumstances where national government revenues can be deposited in “another public fund” set up for a specific purpose by an Act of Parliament.


The big question, therefore, is: Were the proceeds from the Eurobond which the government received on June 24, 2014, paid into the Exchequer account as required by the Constitution?

If so, do the records of the Controller of Budget, the gatekeeper of the Exchequer account, accurately record actual receipts from the Eurobond?

The second question is especially pertinent because the Controller of Budget releases reports on Exchequer receipts to the National Assembly every four months as mandated by the Constitution.

The report, known as the Budget Implementation Review Report, is the bible from the gate keeper.

If you want to get to the bottom of the Eurobond matter, this is where you start.

The second bible in this matter are audited accounts prepared by the Auditor-General.

Everything else is pure propaganda. There is another important to make.

The government has stated that part of the proceeds of the Eurobond were kept in what they describe as ‘sovereign bond account’ at the Central Bank of Kenya and that this boosted our foreign reserves.

The truth of the matter is that money sitting in our foreign reserves originate from multiple sources.

Depositing monies in CBK’s special accounts or keeping Eurobond receipts as foreign reserves does not meet the constitutional requirement.

The money must go into the Exchequer account, which is subject to multiple audits first by the Controller of Budget, secondly, the Auditor-General and finally by the National Assembly.

The reason Goldenberg and Anglo Leasing happened was because revenues were being siphoned off before they hit the Exchequer.

Which brings me back to the official reports to Parliament by the Controller of Budget.

Going through the COB’s reports for the relevant financial years the following emerge:

At page 7 of the report for the financial year 2013/14, it is clear that as at June 30, 2014, Eurobond receipts had not hit the Exchequer account.

The first official record of receipts of Eurobond proceeds is the report of the Auditor-General 2013/2014 which records at page 7 and 8 receipts amounting to Sh34.6 billion ($395,4 million).

The next record from the Auditor-General is headed ‘failure to transfer proceeds from the sovereign bond to the National Exchequer Account’ in respect of Sh53 billion ($604.56 million).

This is the amount that was withdrawn offshore to pay the syndicated loan.

In the same breath, the Auditor-General states clearly that authority of the Controller of Budget to incur expenditure was not obtained.

The next and last receipt into the Exchequer account is a mention of receipts from the Eurobond at page 7 of the report by the Controller of the Budget where she confirms receipt of Sh73.81 billion ($815.44 million).

That is all folks. If you add it all up you come to a figure of Sh108.45 billion of Eurobond receipts into the Exchequer account.

Add the money that went to pay the syndicated loan of Sh53.2 billion ($604.56 million) and you end up with total Eurobond receipts amounting to Sh161.66 billion ($1.75 billion).

Clearly, the maths don’t add up. Considering that we earned Sh173.91 billion ($2 billion) from the Eurobond in June 2014 plus another Sh73.8 billion , making a total of Sh247.7 billion ($2.81billion) — this leaves a gap of Sh86.07 billion.

Last week, the National Treasury in an attempt to explain this gap put out a statement showing that an amount Sh86 billion from Eurobond proceeds was transferred to the Exchequer between September 2014 and March 2015.

However, these transfers do not reflect in the report of the Controller of Budget.

The National Treasury has also put out information on which ministry was given what amount from Eurobond proceeds to fund infrastructure.

This information is superfluous. The contradictory statements coming from the Controller of Budget have only served to fudge the matter.

Let us stick to the official records presented to Parliament — in accordance with the requirements of the Constitution — by both the Auditor-General and the Controller of Budget.