KWAME: Eurobond controversy heralded Kenya's fiscal woes - Daily Nation

Kenya's fiscal crisis traces back to the management of the Eurobond controversy

Wednesday September 12 2018

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About three years ago, I sat as a panellist at a public forum hosted at the University of Nairobi.

It was intended to explore claims made by the minority coalition that the executive arm of government disregarded legal requirements by raising money through the Eurobond loan in 2014.

That panel included representatives of the Treasury, the Central Bank and finance-sector professionals all of whom had detailed knowledge of the $2.75 billion (Sh275 billion) transaction.

The discussion appeared respectable, because a few business associations played a key role in setting it up.


However, it became evident soon after the panel was introduced that the subject was not being dissected honestly and instead the discussion turned into support for the government of the day. We were warned that questioning the government's economic policy was dangerous and harmful to the economy.

Even worse, certain business people with partisan links to government had planned to use the event to advance their view that the ''Eurobond issue'' was a farce being used by the opposition to derail the administration and a friend of Kenya’s private enterprise.

This event, also broadcast on television, resonates in my mind because it illustrates how, despite the availability of facts, professionals can make claims that contradict the reality without being held to account.

It also bothered me because it made it clear in my mind that Kenya had baked in a high likelihood of a fiscal crisis in the medium term and that some private sector organisations were none the wiser.

It is no surprise that Kenya faces a fiscal crisis now because the behaviour at that time revealed that fiscal controls and oversight mechanisms were switched off.


Meanwhile, Parliament continued to treat the Treasury with much more deference than contemplated in the Constitution while the media stood aside, making this grave issue look like a mere dispute on opinions.

Four years since the government contracted debt under the first Eurobond, there has not been a satisfactory explanation for the route uses to which the loans were applied.


The casual nature in which the panel handled the questions on the routing of the money from banks in the United States and how disbursements were made showed disregard for the strict rules of the Constitution.

In fact, the demeanour from the executive suggested that they would not be bothered to answer petty questions about $2.75 billion (Sh275 billion).

Responses by the Treasury and the Central Bank thereafter unveiled the dangerous tendency to conflate fair questioning with the silly claim that outsiders do not understand government operations well enough or that one was animated by political partisanship.

My participation in that panel discussion makes me see tight links to the state of public finances today.

Whenever public-sector officers in the bureaucracy are allowed to use politicians in the opposition as bogeymen, public finance management suffers.


That panel discussion turned away from the discussion that would have traced the path of the finances from the first tranche of borrowed money. Instead it placed emphasis on why Kenyans should not buy into claims made by opposition leaders with no jobs and with poorer understanding of how an economy works.

Every attempt was made to direct the audience to conclude that there remained no questions about the loans because the leading business associations agreed with the narrative put forth by the Treasury.

Even though the sustained effort to mislead the audience was preposterous, it led Kenyan media to cover the Eurobond controversy as simply a matter of political dispute between the ruling administration and the minority coalition.

This panel event remains relevant because its sad conclusion summarises how Kenya’s public finances got to where they are today.


It shows that however influential business lobbies and their leadership are, they have no special qualification to comment on economic policy and shouldn’t be allowed to obscure truth finding just because they are considered titans in Kenya.

Secondly, Kenyans must be concerned when public-sector workers use politicians as bogeymen whenever they are questioned about policy implementation.

It is no surprise that the Treasury and the Executive that considered it irritating to be asked to account for the trail of a loan equivalent to three percent of GDP would still maintain the view that all is well when all signals are that government receipts will not pay for all expenses this year.

A final point is that both the executive and Parliament have had it too easy on public finance management and the fiscal crisis that approaches will test these institutions a great deal.

Based on the behaviour of the recent past, I am not confident that they will handle it well.

Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame