Eurobond debacle was avoidable with co-ordination of information

Auditor-General Edward Ouko at a past event. PHOTO | FILE 

By PATRICK NGUMI

In Summary

• The Treasury, Auditor-General and Controller of Budget should read from same script.

One philosopher once observed, “The truth cannot be burned, beheaded or crucified. A lie on the throne is a lie still, and truth in a dungeon is still truth and the lie on the throne is on the way to defeat, and the truth in the dungeon is on the way to victory.”

This observation may be used to summarise the events of the last few days in as far as Eurobond saga is concerned. Indeed, Kenyan media scene is replete with Eurobond news for all bad reasons.

The Institute of Certified Public Accountants of Kenya (ICPAK) is desirous to demystify this Eurobond for the benefit of Kenyans.

To start with a Eurobond is a bond denominated in a currency not native to the issuer’s home country. Eurobonds are commonly issued by governments, corporations and international organisations.

Like other bonds, Eurobonds obligate the borrower to pay a certain interest rate and principal amount according to the terms of the agreement.

On June 16, 2014, Kenya successfully issued two tranches of a maiden Eurobond ($500 million, at 5.875 per cent whose maturity date is due in 2019 and $ 1.5 billion, at 6.875% whose due date is 2024).

The bond was issued to support infrastructural developments including roads, the standard gauge railway and healthcare infrastructure.

The bond attracted global investors in large numbers leading to oversubscription of about 340 per cent reflecting strong confidence in the economy despite increased threat to national security.

By doing this, Kenya joined Zambia, Rwanda, Nigeria and Ghana alongside other countries such as Angola and Tanzania that have issued Eurobonds successfully in the recent past.

In the ongoing debate and in the interest of natural justice, it is critical to take a serious look into figures presented by the National Treasury, the offices of Auditor General and the Controller of Budget as well as other Kenyans who have differing views on the money was transmitted and utilised by the government.

According to the Treasury statement dated, October 30, 2015, the State issued a sovereign bond in June, 2014 for purposes of general budget support including funding of infrastructure and for the repayment of the syndicate loan amounting to $600 million plus accrued interest of $4.6 million.

Different perspective

It is indicated in the statement that the Treasury had instructed the Central Bank of Kenya (CBK) to open an offshore collection account to receive the proceeds before transferring the net amount to the consolidated fund.

The Treasury further instructed the CBK to pay the $600 million for the principal amount and $ 4.6 million for the accrued interest of the syndicated loan.

The Treasury press release was issued amidst concerns that the government did not fully account for the proceeds received from the sovereign bond.