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Auditor General now questions Treasury’s public debt numbers

NEWS
By Macharia Kamau | July 2nd 2021
The Treasury building, Nairobi. [Elvis Ogina]

The National Treasury is in a spot over the accuracy of public debt figures it has been reporting.

The Auditor-General has queried the level of Treasury’s disclosure of the loans that the government has taken, noting that it has in some instances failed to include new debt.

Consequently, Auditor General Nancy Gathungu has given an adverse opinion on the financial statements for the Consolidated Fund Services for the financial year to June 2020, an indication that the statements might not give a true reflection of the fund, which is where all money received by government goes.

In the report, Ms Gathungu also cites notable differences in the amount that Treasury said it had borrowed locally through Treasury bills and bonds and what was found when the numbers were calculated afresh.

“The summary statement of public debt reflects total external and internal loans balance of Sh6.37 trillion as of June 30, 2020. This is an increase of Sh917.64 billion or 16.8 per cent from the prior year’s closing balance of Sh5.45 trillion,” said the Report of the Auditor General for the National Government for 2019-20 financial year tabled in Parliament on Tuesday.

“The statement also reflects loan repayments of Sh1.48 trillion but does not reflect the new loans procured during the year. Consequently, the accuracy of total loan balance (external and internal) of Sh6.37 trillion as at June 30, 2020 could not be confirmed.”

Treasury has in the past tried to explain that there are instances where a loan taken during one financial year might not be disbursed by the lenders until the following financial year, leading to the difference.

This is especially the case for concessional loans.

Public debt currently stands at Sh7.34 trillion and is expected to further grow over the next financial year as the country borrows to plug deficits between expenditure and revenue collection.

The Auditor General’s report also noted unexplained variance of short-term borrowing balances. Treasury borrows short-term domestically through Treasury bills.

“The summary statement of public debt reflects internal loans short-term borrowing balance of Sh887.14 billion as at June 30, 2020,” the report said.

“However, a re-computation of the expected closing balances based on the opening balance of Sh952.25 billion adjusted for proceeds from issues and redemptions during the year of Sh1.13 trillion and Sh1.192 trillion respectively, yielded a balance of Sh885.14 billion, resulting into an unexplained variance of Sh2 billion.” 

According to the report, the over-redemption of Sh2 billion was not acknowledged by the Central Bank of Kenya and may therefore not be recoverable.

“The accuracy of the reported short-term borrowing balance of Sh887.14 billion as at June30, 2020 could not be confirmed.”

The report also noted instances of inaccurate balances of the money that the government borrows locally through the longer-term Treasury bonds.

“The summary statement of public debt reflects Treasury bonds balance of Sh2.22 trillion as at 30 June, 2020,” said Gathungu.

“However, a re-computation of the expected closing balance based on the opening balance of Sh1.72 trillion adjusted for proceeds from issues and redemptions during the year of Sh580.89 billion and Sh110.98 billion respectively yielded a balance of Sh2.19 trillion resulting in an unexplained variance of Sh26.22 billion.

“Consequently, the accuracy of the reported Treasury bonds balances of Sh2.22 trillion as at June 30, 2020 could not be confirmed.”

Former Auditor General Edward Ouko also raised issues with the Treasury’s accountability on the Eurobond issue of 2014, where the government received Sh250 billion from international investors.

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