Controller of Budget raises alarm over debt use
The National Treasury is on the spot for misusing proceeds from a sovereign bond to pay back loans and salaries.
The revelation was made by the Controller of Budget at a meeting with senators on Thursday.
Treasury is accused of misallocating Ksh.65.1 billion from a Ksh.70 billion sovereign bond that was intended to be used for infrastructure projects in the water, housing and ICT sectors.
The decision by the National Treasury, analysts say, was not only a contravention of the law but could also lead to prospective investors shying away from Kenya’s bond offers.
According to the Controller of Budget Margaret Nyakango, the Treasury reallocated Ksh.65.1 billion from a Ksh.70 billion Euro bond acquired on June 30go says that the funds were used in funding the counties and repaying outstanding debt contrary to the article 201(c) and section 15(2)(c) of the PFM act, 2012.
“The funds were not meant for recurrent expenditure. The National treasury should make sure that their requests are in line with PFM act…,” said Nyakango.
Further she revealed that Kenya paid Ksh.1.7 billion in commitment fees for loans sourced by the government which are yet to be disbursed which the Controller of Budget had termed as alarming.
“This is a way of paying for credit that we have not yet used. It is a way of granting that banks give us loans. These fees are alarming,” adds Ms. Nyakango.
The commission on revenue allocation which also appeared before the Senate committee blamed the National Assembly for approving unsustainable budgets, which in term encourages government to borrow.
Giving a breakdown of how the government has been borrowing over the years, concessional loans were 80% of debt in 2014 but fast forward to 2018, commercial loans dominated more than 40% of all government borrowing.
“We have to take care of the deficit which we face ever year which allows for the government to borrow every year and the legislators are to blame for this,” says Jane Kiringai, Chair Commission on Reveenue Allocation (CRA).
CRA further took issue with the amount of money used in debt servicing which is 36.6% as at the last financial year. Recurrent expenditure was more than Ksh.1.106 trillion, with development taking up only 12% of the budget at Ksh.389.2 billion.
Public debt takes the biggest chunk of the budget at Ksh 1.169 trillion or 36.6%. The rest goes towards pensions and county governments.