Controller of budget changes tune on expenditure of Sh250b Eurobond

Controller of Budget Agnes Odhiambo

The Controller of Budget has made an about-turn on her role in the expenditure of Sh250 billion loan from 2014 sovereign bond.

A day after she told Parliament that she had not approved the withdrawal of money from an offshore account where proceeds from the loan had been deposited, Agnes Odhiambo now says she is satisfied by the Treasury’s explanation despite not being fully involved.

There was drama at the meeting when it became apparent that the Treasury Cabinet Secretary Henry Rotich did not know the exact bank where the money had been deposited. The CS first cited Citibank in the US before an official passed him a note indicating that it was JP Morgan Chase Bank.

But it is the sudden change of heart by the Controller of Budget on the loan repayment from the offshore account that points to pressure from government to have them speak with one voice on the matter.

Authorise the repayment

“The office of the Controller of Budget does not have any mandate in procuring of any debt by the government. This is the sole mandate of the National Treasury through the external resources department,” Ms Odhiambo said during a press conference after a series of meetings with the Treasury officials on Friday.

But the law requires the Controller of Budget to authorise the repayment of the loan by the government, which was not done during the repayment of Sh53.2 billion-syndicated loan in 2014 from the Eurobond money.

Odhiambo explained that the approval of loan repayment is done in two stages. The first stage entails the National Treasury seeking approval for payment of the debt from her office before the actual funding is done.

“In the case of the syndicate loan, the National Treasury wrote to the Controller of Budget on June 28th, last year seeking approval for the repayment of the syndicated loan amounting to Sh53.2 billion which was subsequently approved awaiting funding,” she said.

But the Treasury did not seek the final stage approval after the money was received, a move that led the Auditor General to raise the red flag.

Instead, the Treasury made the payment directly from a special account to the lenders on grounds that this saved the country foreign exchange losses.

“We had seven days to pay and it was only prudent that we pay directly from the account so that we do not have to convert the same into Kenya shillings and back,” Mr Rotich said adding that the transaction saw Kenya save Sh1.2 billion in forex losses. Kenya issued $2billion (Sh174 billion) sovereign bond in June 2014 for ‘general budget support including for funding infrastructure and for the repayment of the syndicated loan amounting to $600 million (Sh53.2 billion at the then exchange rates) plus accrued interest of $4.6million (Sh400 million).

After raising the funds, the country went back for an additional Sh67.8 billion riding on the positive response from the international markets. This brought the total amount to Sh250 billion.

The Parliamentary Public Accounts Committee (PAC), on Thursday asked Odhiambo if she had raised the anomaly with the Treasury, which she replied in the affirmative.

“The payments exceeded the exchequer releases and one of the reasons was due to payment of the syndicated loan. I requested for a reconciliation and verification of the payment to establish the cause in the disparity in the records,” she explained.

She then adjusted the records after the Auditor General raised a storm on the issue. “No other payment had been made from the proceeds of the euro bond without my approval,” she said.

Rotich said after repaying the syndicated loan and other commissions owed to the arrangers of the euro bond, the remaining Sh196.9 billion was disbursed to 14 ministries, departments or government agencies.

Acted within the law

The department of infrastructure took the lion’s share of the funds receiving Sh64 billion, the Ministry of Energy Sh21 billion, Water and Irrigation Sh15 billion and the department of agriculture Sh14 billion.

“Some of the projects have already been completed while others are on going,” Rotich said. However, he did not list the projects. Other departments that received the funds are livestock (Sh2.5 billion), Communication (Sh2.9 billion), planning (Sh44.5billion) and science and technology (Sh8.9 billion) among others.

Rotich maintained he acted within the law despite failing to transfer the proceeds of the sovereign bond to the Central Bank of Kenya.

“It should be noted that the Controller of Budget was kept fully aware about these transactions. Indeed, the Controller of Budget had approved the initial payment authority when it was uncertain whether Kenya would be able to access the international market to float the sovereign bond,” Rotich said.