The Way Forward on the Eurobond

Posted on Updated on

This article first appeared in my weekly column with the Business Daily on December 21, 2015.

Since about October this year the country has been gripped by allegations that the proceeds for the Eurobond have been mismanaged. Opposition alleges that there is still KES 140 billion that has not been accounted for despite government having released a press statement detailing what they consider to be the hard facts of how the full amount of Eurobond was used. However, opposition insists that there is still something awry with this whole Eurobond issue. As I have stated in my previous column, it was absolutely essential that government ensured that Kenyans and global financial markets scrutinizing Kenya, viewed them as having handled the Eurobond proceeds with meticulous care and transparency. However, as is clear, government bungled and although serious allegations were presented in October, it is not until December that Treasury put together a coherent statement addressing the core concerns.

(source: http://apolloassetmanagement.co.ke/wp-content/uploads/2014/07/euro-bonds.jpg)

Whether one believes the proceeds of the Bond have been misused or not, the lax communication response from government means that the suspicions and allegations were allowed to gain momentum and tarnish the image of Kenyan fiscal management globally. Indeed, it can be certain that should government try to issue any more international bonds, they will be priced much higher as has been already seen in the recent CBK issue of a USD 300 million bond that was set at 11 percent; almost double what government got for the Eurobond in 2014. This issue here is that there still is not a general consensus that the Eurobond question has been answered, so beyond being treated to allegations and denials, what is the concrete way forward on this issue?

Firstly, in the press release by Treasury, government presented a list of Ministries, State Departments and other government offices to which they assert funds have been released. Clearly the most obvious action to take is to query whether indeed all government entities tabled as having received Eurobond funds did indeed receive them. If they did not receive the full funds as indicated on the Treasury statement then blame lies with the Treasury and hard questions must continue to be asked. However, if indeed proceeds have been transferred to these entities, then scrutiny should now shift from Treasury to the relevant state offices.

 

(source: http://www.businessdailyafrica.com/image/view/-/2352280/medRes/767328/-/maxw/600/-/wqpelcz/-/treasury.jpg)

Secondly, the Eurobond has to be used for development expenditure and not a cent ought to be directed to recurrent expenditure. I have already noted in past columns the propensity government has for using national budgets for recurrent expenditure; this can be a difficult habit to break. It is therefore crucial that independent parties track the use of the Eurobond and ensure that all of it is used for development.

Finally, opposition is adamant that not all of the Eurobond has been accounted for and that there is a hole of about KES 140 billion. It now time for opposition to stop making general allegations but instead present a clear and detailed statement on what they view to be the  key gaps in the government response, present evidence on any allegations of the misuse of funds, and table the key questions government has not addressed and ought to answer. This document should then be published for all Kenyans and international parties to view and of course opposition should present this statement to government. Doing so will allow all parties interested in this matter to more fully understand what outstanding concerns exist. From there any unanswered queries ought to be addressed by government a failure of which then warrants the needs for continued pressure be placed on government to explain what transpired.

Anzetse Were is a development economist; anzetsew@gmail.com

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s