Taxpayers failed to gain interest from the Sh173.9 billion Eurobond cash that was deposited in a secret government-owned New York bank account.
Account details revealed by the Treasury show that the cash earned Sh14.9 million in interest, which was wiped out by account closing charges and US government fees of Sh17.9 million.
The Public Accounts Committee questioned the Treasury on the amount of interest paid on $2 billion (then Sh174 billion) Eurobond from the account and who its beneficiaries were.
The money remained in the New York account hosted at JP Morgan from late June 2014 to mid-September the same year.
The Treasury has been under pressure to shed light on the expenditure of the Eurobond cash amid concerns that the government is not indicating the specific projects funded by the money raised.
The Treasury also disclosed it paid out Sh104 million in fees to bankers who arranged the transaction, being equivalent to 0.04 per cent of the amount raised.
This came after Controller of Budget Agnes Odhiambo told the committee that withdrawals from the New York accounts were done without the approval of her office — which was in breach of the law.
Parliament’s Budget Office also called for an audit on how the Eurobond cash was used, arguing it had very little or no impact on its original intention of stabilising the exchange rate and bring down the high interest rates.
Interest rates on Treasury bills has risen above 20 per cent, far above what Kenya usually pays for short-term debt, triggering a rise in bank borrowing costs.
The shilling is down about 14 per cent against the dollar this year, and has weakened consistently over the past year due to a decline in tourism, a major foreign currency earner, and a high current account deficit.
The Treasury says the Eurobond was used to pay syndicated loan of $600 million (Sh61 billion) and Sh196.9 billion on projects. It has been challenged to give specific details of the infrastructure projects.
Ms Odhiambo reckons that the Treasury went ahead and paid the syndicated loan from the offshore accounts despite warnings from her office that the move would be illegal.
SOURCE: BUSINESS DAILY