Raila advises investors to keep off Kenyas second Eurobond

CORD leader Raila Odinga has cautioned international financial institutions and investors against buying into Kenya’s second Eurobond proposed to be issued by Kenya for listing on the Irish Stock Exchange.

In a statement to media houses, Raila said that the government of Kenya had failed to account for some money from the first Eurobond issued in June 2014 that reportedly raised a gross amount of Ksh200 billion and a further Ksh81.5 billion raised from a “tap sales” re-opening in December the same year.

“The government and the National Treasury have persistently failed to accurately account for the net proceeds of the Eurobond.  The failures constitute material and significant breaches of the Constitution of Kenya 2010 and the Public Finance Management Act 2012.

“The government of Kenya and more specifically the National Treasury failed to deposit net proceeds of the Eurobond amounting to US$1,999,052,872.97 (Ksh173.9 billion) into the Consolidated Fund as required by law.”

The ODM leader further raised concern over the government’s apparent failure to deposit USD 999,018,457.60 (Ksh99.9 billion) into the Consolidated Fund maintained at the Central Bank of Kenya, adding that the Auditor General report did not support government’s claims that the money had been deposited on September 8, 2014.

He further noted that the Auditor General had failed to ascertain the receipt of USD2,419,016,127.10 (Ksh215.5 billion) with a disclaimer on the receipt, accounting and use of Eurobond proceeds over 28 months after it was received in an offshore account in New York.

“It is disturbing that the official reports of the Auditor General and the Controller of Budget over the 2014/15 Fiscal Year confirm that only USD 395.4 million (Ksh39.5 billion) from the Eurobond issue, and USD 815 million (Ksh81.5 billion) from the Tap Sales proceeds have been deposited into the Consolidated Fund.”

“The National Treasury utilized USD604,560,737.50 (Ksh53.2 billion) from the Eurobond proceeds to pay an outstanding Syndicated Loan without the prior approval of the Controller of Budget with the unaccounted proceeds exposing investors to the risk of the 2014 Eurobond being converted into an illegitimate debt.”

He called on the government to address the significant issues raised in respect to the 2014 Eurobond to the satisfaction of the National Auditor’s office and the country’s spirit of honouring its obligations to external creditors and international capital-markets institutions.

“The inability by the government to account for expenditures of the Eurobond places Kenya at the risk of sovereign default and, at minimum, in the A Pre-default state thus heightening the risk of external debt distress.

“Institutions and investors who subscribed to the Kenya’s inaugural Eurobond could enforce their rights under the law of the State of New York prompting Kenyan taxpayer to pay the tough fiscal conditions that may be imposed to the country,” said the CORD principal.

In May, National Treasury Cabinet Secretary Henry Rotich said that the government was planning to borrow against from the international capital market due to apparent appetite from investors abroad.

Early this year, Raila named several individuals in and out of government suspected of benefitting from the Eurobond proceeds.

The government has however refuted Eurobond theft claims saying the proceeds went into funding development projects in the country.