MPs, Rotich clash over use of Eurobond cash

November 3, 2015 6:52 am
National Treasury CS Henry Rotich with PS Kamau Thugge. Photo/ FILE
National Treasury CS Henry Rotich with PS Kamau Thugge. Photo/ FILE

, NAIROBI, Kenya, Nov 2 – National Treasury Cabinet Secretary Henry Rotich was on Monday hard pressed to explain how Sh192.92 billion drawn from the Eurobond was used.

This emerged during a sitting of the National Assembly Public Accounts Committee (PAC) where MPs voiced concerns that the government is not indicating the specific projects funded by the money raised.

The Committee had summoned the National Treasury jointly with Controller of Budget Agnes Odhiambo to give specific details of the infrastructure projects implemented by ministries, State department and agencies to which the funds were disbursed.

The money remained in the New York account hosted at JP Morgan from late June 2014 to mid-September the same year.

Rotich also disclosed that they paid out Sh104 million in fees to bankers who arranged the transaction, being equivalent to 0.04 percent of the amount raised.

He ended up in an argument with MPs after he claimed that the lion’s share of the Sh44 billion allocated to the Ministry of Planning was disbursed to the Constituency Development Fund (CDF).

Committee chairman Nicholas Gumbo with fellow committee members Aden Abdikadir and Junet Mohammed disagreed saying that the Treasury had breached the CDF Act by claiming that the devolved fund was raised from a loan.

Gumbo cited the CDF Act which states that ‘there is established a fund to be known as the Constituencies Development Fund which shall be a national fund consisting of moneys of an amount of not less than 2.5pc (two and half per centum) of all the national government ordinary revenue collected in every financial year’.

He advanced the argument that Rotich and his Principal Secretary Kamau Thugge were wrong in the assertion because CDF should ideally be raised from revenue and not from proceeds of a loan.

Rotich countered this by the saying that the law was vague as it only provided that the Treasury should make available the money irrelevant of its source.

This came after Controller of Budget Agnes Odhiambo told the committee that withdrawals from the New York accounts were done without the approval of her office over which she does not have control.

Odhiambo reckons that the Treasury went ahead and paid the syndicated loan from the offshore accounts despite warnings from her office that the move would be illegal.

However, the controller of budget insisted that it was necessary for the Treasury to get her approval even as Rotich and Thugge told MPs that her approval was not necessary. The Special Overseas Accounts are maintained by the Treasury and has two signatories stationed at the Treasury Department.

The MPs held the view that Odhiambo was duped into giving consent to retire the syndicated loan since she was not a signatory of the overseas accounts.

The Office of the Controller of Budget was created as an expenditure monitor to ensure money is spent for budgeted functions and to seal loopholes for fictitious payments that characterized the infamous Goldenberg scam.

Treasury went ahead and paid the syndicated loan from the offshore accounts despite warnings from her office that the settlement would be in breach of Article 206 of the Constitution.

The Article requires that all government money be deposited in the Consolidated Fund Services (CFS) before approval for use is sought from the Controller of Budget.

Gumbo called for an audit on how the Eurobond cash was used, arguing it had very little or no impact on its original intention of stabilising the exchange rate and bring down the high interest rates.

Interest rates on Treasury Bills have risen above 20 percent, triggering a rise in bank borrowing costs.

The shilling is down about 14 percent against the dollar this year and the Treasury has attributed the weakening to a decline in tourism, a major foreign currency earner, and a high current account deficit.

The Treasury says the Eurobond was used to pay syndicated loan of Sh61 billion and Sh196.9 billion on projects.

Thugge earlier said the government had to make a choice between paying the syndicated loan directly from Central Bank’s account in New York and therefore save on foreign exchange losses and importing the money into the local exchequer account before being released by the Controller of Budget.

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