Curiouser and curiouser: Finally, Kenya Treasury moves to ‘clear the air’ on Eurobond

Saturday December 12 2015

On December 3, Treasury released a new press statement intended to clear the air over the Eurobond. Did it?

In a previous column on the Eurobond, I claimed that it was not possible to identify in Controller of Budget reports the point at which Ksh38 billion of the funds came onto the budget.

READ: Ten facts about the Eurobond: What we know, what we don’t, and what’s vague

Treasury’s new figures provide a clear schedule of when money passed to the Consolidated Fund. There are eight transfers with dates, ranging from June 30, 2014 to June 30, 2015. Taken together, these eight transfers account for Ksh196.9 billion, the balance of all Eurobond proceeds after the syndicated loan and various fees. What corroborating evidence do we have of these transfers?

The Treasury statement contains a separate note purporting to be from the Controller showing eight transfers also summing up to Ksh196.9 billion.

However, there are two discrepancies between the Treasury and COB figures even in this document: Treasury shows the first transfer on June 30, 2014 (during the 2013/14 financial year), while COB shows the first transfer on July 3, 2014 (during the 2014/15 financial year). Treasury shows the fourth transfer on October 30, 2014, while the COB shows it on September 30.


The date of the first transfer is important, because Treasury claims to have spent Ksh25 billion of the Eurobond proceeds in FY 2013/14, while this would not be possible if the first transfer were, as COB indicates, only on July 3. As I have indicated before, the fourth quarter COB report for 2013/14 does not mention any Eurobond money coming onto the budget in 2013/14.

In the 2013/14 Auditor General report, a query is raised about Ksh35 billion from the Eurobond spent in 2014/15 and booked as spent in 2013/14. This matches the value of the disputed first transfer, though it is higher than what Treasury now says it actually spent in 2013/14. It does not appear that there is a dispute between the Treasury, OAG and COB over whether this money was used for infrastructure spending, but only about when that happened.

Although confusing and contradictory in places, the COB report from the first quarter of 2014/15 describes Ksh177.5 billion in proceeds from the Eurobond. Of these, Ksh53.8 billion went to the syndicated loan and Ksh38.5 billion remained in the bank.

The balance of Ksh85.2 billion had come onto the budget and been spent (to cover a gap in domestic borrowing and to fund development projects). This figure is roughly similar to what Treasury says came onto the budget between June 30 and September 19, 2014.

That would capture everything that happened during the first quarter of 2014, unless COB is correct about the date of the fourth transfer (September 30). Let’s assume Treasury is correct about the dates and they have accounted for Ksh85.2 billion by end of the first quarter. That leaves Ksh111.7 billion to be accounted for. When did this balance come onto the budget?

Ultimately, everything hinges on a series of guesses about numbers from Treasury and COB that have no accompanying explanations. My best guess is that COB made an error in the first quarter and did not report any Eurobond funds from 2013/14 that were carried forward to 2014/15.

However, later they reversed themselves and booked these funds as arriving in 2013/14. This explains a shift from no balance carried forward in the first quarter report to just over Ksh140 billion carried forward in the second quarter report.

Assuming that Ksh35 billion of the total Ksh177.5 billion was also spent in 2013/14 on infrastructure projects, this would have left a balance of about Ksh143 billion, close to the reported balance. If the syndicated loan were booked in 2014/15, which appears to be the case, this would have left a balance of about Ksh90 billion.

COB already reported that Ksh50 billion of this was used as a substitute for domestic borrowing, leaving about Ksh40 billion. Since that Ksh40 billion was already captured in the balance carried forward, COB may never have bothered to report on its use. Sloppy, but possible.

The problem with this, other than that the numbers do not exactly match, is that it appears from the Treasury figures presented now that this money was not all transferred to the Consolidated Fund in 2013/14 to be treated as a balance carried forward. Normally, a balance carried forward is understood as a balance in the Consolidated Fund, not a balance of all government bank accounts.

Treasury claims to have transferred only Ksh35 billion of Eurobond funds to the Consolidated Fund in 2013/14, and to have spent that in 2013/14. Thus the rest of the funds had to be transferred to the Consolidated Fund during 2014/15 at specific moments, and the COB did not report on those transfers at any time during the year. Why not?

Jason Lakin is Kenya country director for the International Budget Partnership. E-mail: [email protected]