Eurobond cash: Treasury cagey on how amount will be spent

The Kenyan government has increasingly grown cagey over ‘development projects’ expected to be funded partly by proceeds from recently floated Sh202 billion dollar denominated bond.

Even after promising a plan of fund distribution in a 154 page Eurobond prospectus, the National Treasury only offered a three sentence generic statement on how the funds will be used, rekindling memories of how the 2014 Eurobond was shrouded in secrecy.

”Kenya expects the net proceeds of the issue of the Notes, before expenses, to amount to approximately $1,999,600,000 which it intends to use for financing development expenditures and to refinance part of its obligations outstanding under certain syndicated loan agreements,” Treasury stated.

The government’s unwillingness to provide details of how the money raised will be used has left Kenyans guessing, with some fearing that the country will have nothing left for development after clearing pending debts.

 

WHAT WE KNOW

According to the “Plan of Distribution” in the prospectus, Kenya syndicated loans from October 2015 (debt now $646 million) and March 2017 ($1 billion) and proceeds from the new February 2018 issue will be used to pay all of the 2015 loan and part of the 2017 loan and to “manage the maturity profile of the government’s debt.”

In April, Kenya is expected to repay $646 million (Sh66 billion) from the two-year $750 million (Sh76 billion) loan taken in October 2015, whose maturity was extended by six months in October last year.

The original Sh75 billion loan was syndicated to a group of 26 banks and arranged by Citigroup, Standard Bank and Standard Chartered. The loan was to address some of the interest rates pressures by then and attracted a 5.7 per cent interest, meaning Kenyans will pay at least Sh4 billion in interest.

In May last year, Kenya borrowed $1 billion via a syndicated loan from commercial banks, $200 million more than it had indicated in March, the same year.

The $1 billion loan mostly used to fund general election was split into a two-year tranche and a three-year tranche. The loan was arranged by Citigroup, Rand Merchant Bank, Standard Bank and Standard Chartered Bank.

According to the prospectus, the 2017 syndicated loan facility just like the 2015 one can be redeemed earlier on a bond issue by the government of Kenya or the final maturity date, however, the lenders have discretion to waive this prepayment right following an issue of a new bond by Kenya.

RED FLAGS

Top economists in the country have already raised red flag on the government’s borrowing appetite, saying that it will put the country in a debt cycle.

”If we recall that two years ago Kenyans were debating the evidence trail regarding the 2014/15 EuroBond, be very concerned,” Institute of Economic Affairs Kwame Owino said in one of his tweets.

The 2014 issue continues to be a mystery, with top government and opposition officials casting doubts on what exactly the loan was used for.

In October 2015, the controller of budget Agnes Odhiambo raised troubling questions about the use and whereabouts of Sh176 billion borrowed from Europe in 2014, revealing that Sh53.2 billion was withdrawn from the account and used to pay unknown loans without her approval.

Testifying before the Public Accounts Committee, she said that it was not clear how the balance of Sh122.8 billion was spent or whether it was still in the account.

Auditor General Edward Ouko added a twist to the saga in his 2016 audit report when he claimed that the government could not account for Eurobond funds two years after it claimed the cash was allocated to ministries.

“Investigations into the receipts, accounting and use of funds related to the Euro Bond are still ongoing and the accuracy of the net proceeds of Sh215,469,626,035.75 is yet to be ascertained,” Ouko said.

So far, Treasury officials have remained silent on the matter, avoiding media inquiries on the subject.

Leave a Reply

Your email address will not be published. Required fields are marked *