Was
the Eurobond properly used? This is the question that currently lingers in the
mind of concerned Kenyans. Since the time that the Controller of Budget Agnes
Odhiambo raised questions on its spending and the apparent stashing of the cash
in accounts located in foreign countries, we have been treated to a game of
circus as the government has not tabled the specifics about the expenditure of
the Eurobond.
After
the issuance of the $2 billion sovereign bond, the chiefs at the national exchequer
committed a pecuniary error by breaching the Article 206, Section 17(2) of the
Public Finance and Management Act of our constitution by making the payments to
an overseas account. The aforementioned act states that the sovereign bond has
to be paid directly into the Consolidated Fund through the Exchequer Account. This
is one factual act that the practicing economists at the National Treasury wrongly
committed. It was this constitutional contravention that apparently led the
Controller of Budget to raise questions on the accountability of the funds but
later on made a u-turn and declared that the proceeds from the bond were
properly utilized. The circumventing by the Controller of Budget was a
suspicious act because she seemed to have been threatened by the ‘tyranny of
numbers’ brigade of being smoked out of the office.
Fast
forward, the three main objectives of the proceeds from the Eurobond were as
follows: first, to reduce on the amount of money that the government borrows
domestically. Secondly, to stabilize the exchange rate and thirdly to ease
pressure on the foreign exchange reserves. So have the objectives been
achieved? The answer is a plain NO. The Jubilee administration seems to be
reeling from the effects of instituting and choreographing a weak and poor
macroeconomic management strategy. If indeed the finances raised from the Eurobond
were to reduce the rate and level of domestic borrowing by the government, why
are we witnessing escalating levels of domestic borrowing?
In
August this year, the total domestic debt was shs.1.38 trillion and by the end
of the month of November 2015, it had risen to a tune of shs.1.47 trillion. This
certainly contravenes the spirit of reducing on domestic borrowing. High levels
of domestic borrowing by the government have one greatest danger; the
crowding-out effect of the private sector. The government can borrow money at
any interest rate and so if it decides that it will issue out the bonds and the
securities, most commercial banks will prefer buying the securities from the
government to lend it money because of the attractive interest rates rather
than lending the same money to the private sector. This leaves little amounts
of finances to be used by the private sector and in the medium-term and
long-term leads to a stagnated rate of economic growth and development. It is
therefore a fact that the National Treasury has failed to reduce on the levels
of domestic borrowing.
In
addition, the proceeds from the Eurobond have done little to be able to
maintain a stable exchange rate of the Kenyan shilling against the US dollar. At
the time of the issuance of Kenya’s first ever sovereign bond, the exchange
rate was approximately shs.87 for $1 but currently the shilling exchanges the
dollar at the rate of shs.102 for $1. This is a failure by the Treasury chiefs
and it is a fact. However, they may put forth the argument that we have a
floating exchange rate system and not a fixed one but now they themselves crafted
a mediocre and economically warped thought that the Eurobond would stabilize
the exchange rate. This is some bit of hotheaded economics because essentially,
we are largely an import-based economy and in any case we export primary
products that are not wholly processed. Hence, it’s a fallacy to try and
imagine that proceeds from a sovereign bond can stabilize the exchange rate of
an economy that thrives on importing most of its locally consumed products and
one that survives on exporting primary products.
According
to the National Treasury, out of the shs.250 billion raised from the Eurobond,
shs.196.9 billion is said to have been channeled towards the financing of
infrastructure projects in the country while shs.52.3 billion is believed to have
been used in servicing a syndicated loan that the government obtained from
three commercial banks in May 2012. These banks were the Citibank, Standard
Chartered Bank and the Barclays Bank. The National Treasury has come out
strongly to state that the shs.196 billion was allocated to various ministries
and state departments as follows:
Department of Infrastructure shs.49.3 billion
Ministry of Planning shs.44.5
billion
Ministry of Energy shs.18.1 billion
Department of Water shs.11.1 billion
Department of Agriculture shs.11 billion
Ministry of Lands and Housing shs.9.1 billion
Department of Science and Technology
shs.8.9 billion
Ministry of Education shs.6.2 billion
Ministry of ICT shs.2.9
billion
Ministry of Industrialization shs.2.7 billion
Department of Tourism shs.2.6 billion
Department of Livestock shs.2.4 billion
Department of Culture shs.1.2 billion
Department of Fisheries shs.1.2 billion
The
totals add up to shs.196 billion and the balance used up for payment of the
syndicated loan, commissions and taxes.
Provision
of the breakdown on the amounts allocated to the various ministries and state
departments is perhaps a job well done but now what the Treasury top honchos
have failed to give is the subsequent itemization of the specific projects that
have been financed by the Eurobond. We need to be shown which projects have
been established and not being treated to empty rhetoric. If the funds from the
Eurobond proceeds were plainly given to ministries and state departments
without specifying which projects to establish, the funds may have ended up as
part of the normal budgetary allocation to the ministries and departments.
What
really irks me is how this issue of not only national concern but also
international concern is being politicized. Politicians from both the ruling
coalition and the opposition are seeking to gain political mileage with the
Eurobond issue. However, politicians who happen to be career sycophants from
the Jubilee side put up arguments that makes them to come out as automatons and
simpletons who have no goodwill for Kenya at heart. Calling for a press
conference by Members of Parliament to defend matters that are to be defended
by the Executive jeopardizes and subsequently weakens the oversight role of
Parliament. As a matter of fact, MPs led by Aden Duale and Prof. Kindiki Kithure directed their
exasperation in the form of filibusters at the Opposition chief Raila Odinga on
the perception that the former premier is unhappy that proceeds raised from the
Eurobond were not used to fund projects that were began by him.
This
is a skewed way of reasoning. Look, one of the unseen roles that the government
of the day needs to execute is the provision of continuity in government. If indeed
the Jubilee-led administration was to avoid cases such as the cash crunch it
could have made an initiative to complete the projects that were started by the
previous government instead of coming up with new projects which need extended
funding hence competing intensely for the available scarce resources. These projects
regardless of who was their initiator seek to benefit Kenyans and improve the
country’s economy but it is something that Duale and his ilk of backslappers
seem not to understand but instead they have chosen to fantasize on it with the
aim of politically decapitating Raila Odinga.
Whether
one belongs to the opposition or the government-side of the political divide,
national economic issues are to be devoid of politics and it is because of
cheap politicking that Kenya’s Eurobond value has begun to slump at the Irish
Stock Exchange. So if those who belong to the opposition raise questions about
expenditure, it is the Executive to come out and defend their record by
providing substantial proof. But because of pseudo-intellectualism we choose to
treat those who are far from the centre of power as mere noisemakers and
economic saboteurs. Citizens should forever be raising and asking hard
questions on government expenditure because economic hardships know not which
side of the political divide you belong to and which political ideology you
subscribe to. In any case, the allegations by Odinga need to be taken seriously
if past whistle blowing events are to go by. With precise hind thought, he is
the one who unearthed the dubious deals of the legendary Anglo-Leasing scam,
the flamboyant Artur brothers and more recently the National Youth Service
scandal in which he was initially dismissed but later on the truth revealed
itself.
Political
sideshows that we are being treated to are pure fantasies with politicians
seeking to edge out each other politically. At the end of the day, there would
be deviation from what we need to know; the particulars of how the Eurobond
proceeds were used. Whether Raila Odinga is arrested to substantiate his
allegations or whether Henry Rotich the Cabinet Secretary in charge of the
National Treasury resigns, to me is a drop of water in the ocean. My desire is
to see proper accountability of funds because I am a taxpayer. The people’s
power should reign supreme because we the citizens rejoice under economic
prosperity or suffer under economic turbulence.
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