Mystery over how National Treasury spent Eurobond cash

It took Treasury nearly one year to fully transfer the billions it held in the Sovereign bond account to the Exchequer account, adding to the mystery surrounding the international loan.

The last amount of Sh47 billion was transferred in June this year to the Exchequer account, 12 months after the Government received the first part of the loan, according to a statement from Treasury.

A scrutiny of the prospectus also shows that Treasury gave investors such a general description on what the money raised from the sovereign bond would be used for that allows it to virtually spend it on anything it chooses.

According to the 146-page prospectus, Treasury told investors the money would be used "for general budgetary purposes, including funding of infrastructure projects and repayment of the syndicate loan."

"Kenya expects the net cash proceeds of the issue of the notes, before expenses, to amount to about Sh2 billion ($1,999,800,000), which Kenya expects to use for general budgetary purposes, including for funding of infrastructure projects and repayment of about Sh60 billion ($600 million) loan incurred in 2011/2012 that matures in August 2014," the prospectus read in part.

Apart from the loan, the prospectus does not list any specific infrastructure project, which gave it the headroom to spend the rest of the money on projects of its choice.

The sovereign bond was expected to achieve lower interest rates, a build-up of international reserves, strengthening of the Kenyan shilling and lowering inflation, which Treasury insists had been achieved.

The loan was raised in two parts, the first, which was what had initially been planned for in June 2014 and the second in December.

Kenya issued a Sh174 billion ($2 billion) sovereign bond in June last year, which was oversubscribed more than three times.

This saw the Government go back six months down the line, riding on previous successes and goodwill to raise an additional Sh67 billion. This brought the total loan to Sh250 billion.

Treasury says after repaying the syndicated loan and other commissions, the remaining Sh196.92 billion was disbursed to 14 ministries, departments or Government agencies. But Treasury has not yet provided additional breakdown on what exactly the money was used for.

The latest debate in which the Opposition are demanding answers to how Sh140 billion of the Eurobond proceeds were spent begs the question on how National Treasury used the Sh250 billion raised from the international bond market.