Thursday, 24 December 2015

MATTERS EUROBOND AND POPULIST POLITICS:


The Grand Coalition principals, Mwai Kibaki and Raila Odinga, ‘oversaw’ arguably one of the biggest scandals in Kenya’s history – the Anglo-Leasing.

In December 2011, a Court in London made a determination that compelled the Kenyan government to pay Kshs. 1.5 billion to a Swiss company, Mercantile Finance Corporation – one of the 13 Anglo-Leasing companies.

The government realized that there was no room for appeal against this decision. Worst still, on May 2014, the Swiss company gave the government an ultimatum to pay up or have its properties abroad either attached or auctioned.

Towards this end, the Jubilee Government cleared the Anglo-Leasing debt. The payment of this debt improved the country’s credit risk profile. Actually, both Standard & Poor and Fitch Ratings gave Kenya a B+. This also paved way for the government to borrow money from the international market through the Eurobond.

Some proceeds of the $2 billion Eurobond were used to repay a 2-year Kshs. 52 billion loan borrowed from a syndicate of European banks by the Grand Coalition in mid-2012. The balance was supposed to finance part of 2014/2015 budget.

Even Dr. Samuel Nyandemo of the University of Nairobi has joined the bandwagon of those asking the government to mention the 'specific' projects that the Jubilee government funded with the Eurobond proceeds.

'...Let the National Treasury give a list of tangible projects it did with the money instead of leaving it as Uhuru-Raila duel.' - Dr. Nyademo, Sunday Nation, December 13, 2015.


                                                                        Source: Capital FM

Now this million-dollar issue was addressed by the Treasury for the umpteenth time just last week.

After paying the Kshs. 52 billion loan from a syndicate of European banks, the balance was 'sent' to the Consolidated Fund, of course from the offshore account. It was aggregated with money from other revenue sources. Here is where the problem begins.

The National Treasury says that the net domestic borrowing by standard fiscal statistics comprises of Treasury bills and bonds, overdraft at CBK and Government deposits.

Get this, Eurobond proceeds were considered as Government deposits with CBK and consequently, treated as 'domestic borrowing.' This is where Kenyans don't get it.

Treasury is now misleading us by telling us how Eurobond proceeds 'suddenly' became part of the net domestic borrowing for FY2014/2015.


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