- Kenya’s $168Bn plundered development loans were taken over 11 year period between 2010 and 2021
- In one instance, the OAG raised an issue with the missing drawdowns for three loans from BELFIUS Bank and Unicredit totaling €29,510,462 (Sh4.1billion).
- The audit examined how 39 commercial loans valued at $168billiom (Sh1.36 trillion) during the time were used, and whether they were borrowed legally.
The Office of the Auditor General has opened a can of worms on the possible diversion of loans and plunder of funds disbursed to Kenya for development over the past 10 years.
A Special Audit by Auditor General Nancy Gathungu, on loans Kenya took between 2010 & 2021 shows that the country received $ 167.7 billion (Sh1.13 trillion) in the consolidated funds accounts however, the accountability of the funds is in question.
The revelations come at a time when President William Ruto has already gazetted the Presidential Taskforce on Forensic Audit of Public Debt to conduct a fresh analysis of Kenya’s obligations.
The special audit shows that Although proceeds from 13 syndicated loans & sovereign bonds totaling Sh1.13 trillion had been received in the Consolidated Fund, there was no evidence that funding had been applied exclusively to finance development expenditure.
“Although proceeds from syndicated loans and sovereign borrowings were being deposited into the Consolidated Fund by the provisions of Section 50 of the Public Finance Management Act, 2012, there is no proper accountability on the extent of application of the loans to development expenditure,” said Gathungu in the report.
In one instance, the OAG raised an issue with the missing drawdown for three loans from BELFIUS Bank and UniCredit totaling €29,510,462 (Sh4.1 billion).
Loans with no drawdown typically refer to loan agreements where the borrower has not yet accessed or withdrawn any of the funds available under the loan.
READ ALSO: Kenya’s Parastatal Set for Privatisation Declared Insolvent Over $71m Debt
Plundered Development Loans
The audit examined how 39 commercial loans valued at $168billiom (Sh1.36 trillion) during the time were used, and whether they were borrowed legally.
The top lenders in the review period included the Eastern and Southern Trade and Development Bank Standard Bank of South Africa Ltd Isle of Man Branch (Sh142.3 billion), and CGMG (Sh107.8 billion).
Others were the China Development Bank which issued Sh60.5 billion and the Eastern and Southern Trade and Development Bank with Sh51.6 billion,
“Once the loan proceeds have been received in the Consolidated Fund, the monies are utilised for normal Government expenditures that are falling due at the time of receipt of the said funds. No schedule is maintained on the expending of the loan proceeds,” said Gathungu.
Euros dominated Kenya’s borrowing in the commercial market in the period. The records show that the Treasury borrowed 16 dollar-denominated loans valued at Sh1 trillion at the then-prevailing exchange rates, 22 euro-denominated loans valued at Sh288 billion, and a South Korean Won-denominated loan valued at Sh102 million, all from commercial markets.
To further rub salt in the wound of Kenyans the OAG has revealed that the National Treasury does not carry out periodic reconciliations of its records against those of the creditors.
Further Gathungu, said that the due borrowing process is not always being adhered to consistently. For instance, some loans were being contracted before the legal opinion of the Attorney General was rendered.
The special audit established that 26 loans were contracted before the respective legal opinions of the AG were received.
Of these loans, legal opinions for 25 loans were signed later while the remaining loan was outstanding as at the time of the audit.
In the absence of legal opinion ahead of contracting the loans, the country is at risk of entering into agreements whose terms may be unfavourable.
“The special audit circularised the creditors for 36 of the 39 loans to obtain an independent confirmation of the outstanding balances, principal, interest, and any other charges paid as of 31 December 2021.”
“Responses were received from 21 creditors of the 36 circularized. There were unexplained discrepancies between the loan balances as per the National Treasury records and the individual creditor confined balances as of 31 December 2021,” said Gathungu.
Going forward the Auditor General is recommending that the National Treasury carry out periodic reconciliations of the loan balances in the system with those of the creditors, with a view of tracing and fully reconciling any differences.
Further, it should also establish an accountability framework for borrowed funds that specifically identifies the projects or programs the loans are applied.
Read Also: China Tops Kenya’s Bilateral Loans With Massive $7.2 Billion
