Broke Treasury borrows Sh7.2bn to buy poll kits
Posted Thursday, October 25 2012 at 21:49
- From the Statement on the Revenues and Net Exchequer releases published by the Treasury, for the first two months of this financial year, the government had only raised Sh101 billion.
- The Treasury should have raised at least Sh200 billion for the two months.
- Mr Githae has given the Kenya Revenue Authority a target of Sh1 trillion ahead of the expected steep rise in public expenditure as the country rolls out the devolved government provided for in the Constitution.
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The state of the government’s finances came into sharp focus on Thursday after the Treasury announced that it had borrowed Sh7.2 billion (65 million euros) from a commercial bank to finance the acquisition of biometric voter registration (BVR) kits.
Finance minister Njeru Githae announced that the government was borrowing the colossal amount from Standard Chartered Bank and that the money is due for disbursement on November 4. The loan will be repaid over a period of 10 years at the rate of 5.12 per cent.
Mr Githae’s announcement threw a new puzzle in the maze that has become the journey towards next year’s General Election, coming only a day after Prime Minister Raila Odinga told a press conference attended by Mr Githae and Treasury PS Joseph Kinyua that the supplier of the kits would be paid today.
The Treasury’s borrowing to finance the purchase of the kits was the clearest sign that the government’s finances are in dire straits and without any room to manoeuvre for the extra Sh3.5 billion needed to complete the BVR deal.
Besides, it was not clear why the Treasury went for more than double the amount of money that was due to the supplier of the kits.
Mr Githae’s denied suggestions that the government was broke even as the International Monetary Fund (IMF) released a statement indicating that the Treasury had requested for and got a waiver for non-observance of the terms of payment for a past loan.
“In completing the review, the executive board approved the request for a waiver for the non-observance of the performance criterion on the non-accumulation of external arrears for end-June 2012, and the modification of performance criteria for the next 12 months to fit the revised macroeconomic outlook,” the IMF said.
The government’s financial position has more recently been made more difficult by the fact that the Treasury has overshot its overdraft facility limit at the Central Bank of Kenya’s against the backdrop of sluggish revenue collections.
Mr Githae said the StanChart loan deal, which had taken three weeks to negotiate, was more favourable than an earlier $600 million syndicated international loan facility it negotiated early this year at a price of 6.73 per cent. The 5.12 per cent cost for the BVR deal includes all associated fees.
Mr Githae said “emergency” funding became necessary because the supplier of the BVR kits had refused to deliver them unless it was paid the entire amount, causing negotiations to drag on.
The supplier relied on the original contract which specified that if the negotiations were finalised later than October 15, the government was to pay the entire amount before the kits are supplied.
“The negotiation team viewed the supply contract as skewed since it meant the Government of Kenya is to pay in advance for all the BVR kits,” said the minister during a briefing at the Treasury.
The contract, a government-to-government deal with state-owned Canadian Commercial Corporation (CCC) identifies Morpho Canada as the suppliers of the kits with guarantees from its associate, the Export Development Corporation of Canada (ECD). Standard Chartered Bank was to finance the deal.
It was, however, not known to the Kenyan public that the Treasury had opened negotiations with a commercial bank to directly finance the purchase of the BVR kits.
The Canadian government through the EDC or CCC had been stated as the financier of the deal.