Why Kenyans can’t afford the painful KQ debt experience

A Kenya Airways plane at the Jomo Kenyatta International Airport. PHOTO | FILE 

By DENNIS KABAARA

The name is Bond…Eurobond.  It seems we just can’t get away from this debate.  As far as I can tell, the Treasury has issued five press statements with little success in eliminating the air of confusion around the transaction.

The Sunday Nation edition of January 17 aptly captured this confusion. The newspaper reported that Treasury secretary had confidently stated that Kenya would return to the international financial market to raise more Eurobond-type funds (Sukkuk and Samurai bonds) because “we can’t have our cake and eat it”  - techno-speak for “if we want to grow, we need to spend, and since we don’t have oil, we simply have to borrow.”

In the same paper, economist David Ndii continued his coruscating analysis of what really happened to the Eurobond, focusing this time on implications for Kenya.  

And then towards the end of the paper, the Treasury carried its latest (that is, fifth) double-spread explanation of what really happened.

The trouble with the Treasury’s explanations is that each one has been different from the previous one.

First, we issued the Eurobond to fund priority infrastructure projects as well as general budget support. Now, we issued it to boost forex reserves, hold down interest rates and inflation, and to shore up the shilling (which is the Treasury’s normal work, anyway).  The problem is that first, we had a list of projects, now, we don’t, and can’t produce one.

Then we learnt that the Treasury, with all of its wonderful cash flow forecasting, transferred Sh25 billion from the sovereign bond account to the national exchequer account on September 15, 2014 before transferring a similar amount four days later. 

The question is what happened that week. We could go on and on.

If indeed the funds were properly received and disbursed, why is it that the original listed Ministries, Departments and Agencies (MDAs) funded by Eurobond cash are the self-same MDAs that account for 75 per cent of total development pending bills at the end of 2014/15?

It would have been so much easier – even politically – had the Treasury first identified projects that were (wholly, or partly) financed by the Eurobond, leaving observers, pundits and commentators to then seek different sorts of truths (like whether the projects exist and what their state of completion is).

That this was not the approach used explains the focus on accounting ( how much money came to Kenya and how it was used), and accountability (suspicions around money laundering and outright theft).

It will come as no surprise if the Treasury’s reluctant transparency leads us into deeper and more frightening questions as to who the actual bond holders are and who is benefiting from its current rising yield.

And now we’re going for more borrowing! This Jubilee administration can’t help itself. This week, CNN ran a piece titled: “Kenya’s Mega-Projects:  What can $50 billion (Sh5.1 trillion) do for an economy?” 

Many viewers must have asked where the number $50 billion come from.

Well, the Treasury’s own mega-project estimates total Sh5.7 trillion. As a comparison, Kenya’s gross domestic produce – at market prices – totalled Sh5.3 trillion in 2014. These are not the only mega-estimates.