The national government has already spent part of the $2 billion (Sh204.6 billion at current exchange rates) raised through a sovereign bond without approval from the Controller of Budget.
National Treasury Principal Secretary Kamau Thugge told the National Assembly’s Parliamentary Accounts Committee (PAC) that proceeds from the sovereign bond were deposited in an offshore account to enable the Government to pay a syndicated loan without incurring extra costs.
Mr Thugge was being grilled by the PAC on Friday in Mombasa over queries raised in the Auditor General’s report on the Government’s expenditure in the 2013-14 financial year. The report claimed that the Government did not account for Sh67 billion during the period. However, it has dismissed the claim as misleading.
The Auditor General’s report further indicates that $1,999,052,872.97 (Sh204.5 billion) of the $2 billion Eurobond that was received on June 24 last year was deposited in an offshore account.
According to PAC and the Auditor General, this was in contravention of Article 206 of the Constitution and Section 17(2) of the Public Finance and Management Act 2012, which stipulates that all money raised or received by or on behalf of the national government should be paid into the Consolidated Fund.
The Auditor General’s report indicates that on July 3 last year, $395,439,262.50 (Sh40.5 billion) was transferred to the Exchequer to fund infrastructure projects and was accounted for in the 2013-14 financial year.
On the same day, another $604,560,737.50 (Sh61.8 billion) was withdrawn from the offshore account to fund repayment of the syndicated loan but was recorded in the 2014-15 financial books.
The report states that the authority of the Controller of Budget to incur the expenditure was not obtained.
Thugge, however, said although the Controller of Budget Agnes Odhiambo did not write to give the Government permission to repay the loan, she was aware it.
“We wrote to her (Controller of Budget), but although she did not give permission she was aware of all the transactions,” said Thugge.
PAC Chairman and Rarieda MP Nicholas Gumbo wants the Government to explain if interest accrued during the 10 days the money was in the offshore account, and where it went.
“We want to know why the sovereign bond money was banked in an offshore account. Which country was that account in and who were the signatories? We also need to be told if the move (to bank the money in an offshore account) is behind the current weakening of shilling against the dollar,” he said.
Thugge, who was grilled for close to five hours, said the banking of the money in the offshore account was necessary as it was supposed to repay the syndicated loan.
He said the Government saved up to $100 million (Sh10.2 billion) by stashing the money in the offshore account.
“This was the first sovereign bond and we have learnt a lot. We believe that the Controller of Budget should know, but it appears there was an omission in the process. The Controller of Budget was, however, in the picture all through,” Thugge added.
The Government, he said, paid $600 million (Sh61.4 billion) for a syndicated loan to Standard Chartered Bank Plc.
Committee member Abdikadir Aden (Balambala MP) said the Government erred by banking the money in an offshore account instead of transferring the dollars into the country to help stabilise the local currency.
On the auditing, the PS submitted documents indicating that he answered all the queries raised by the Auditor General, but his answers were ignored in the final report.
“From the documents, you will notice that some of the queries in the report were answered not once, not twice, but thrice, but the Auditor General chose to ignore the answers and went ahead to include the same queries in the final report,” said Thugge.
Mr Gumbo said the committee would probe if the Auditor General ignored answers from the Government, adding that this would be “unacceptable, unprofessional mischief” if proven to be the case.
He added that PAC would summon all accounting officers whose ministries failed to submit records for auditing in time, as well as the Controller of Budget over the spending of the Eurobond cash.
He, however, noted that he had spoken to the Controller of Budget earlier, but she denied knowledge of the withdrawal and expenditure of the Eurobond cash.
