Economy

Treasury queried over secret US bank account

ROSE

Controller of Budget Agnes Odhiambo .PHOTO | FILE

The Treasury has been asked to explain the interest earned from a secret government-owned New York account that held proceeds of the $2 billion (Sh204 billion) Eurobond.

The Public Accounts Committee (PAC) wants to know how much interest was earned from the account and who its beneficiaries were as well as the expenditure audit of the Eurobond.

This came after the Controller of Budget Agnes Odhiambo told the committee that the Treasury would be best-placed to respond to the question.

Withdrawals from the New York accounts were done without the approval of the Controller of Budget—which was in breach of the law.

“When money was kept in the special account, did it earn interest and what were the terms? It is the National Treasury that can answer this,” Ms Odhiambo said on Thursday.

She added that Parliament should seek to know the projects that were funded from the Euro Bond.

Parliament’s Budget Office also called for an audit on how the Euro Bond 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 government 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 Kenya shilling is down about 14 per cent against the dollar in 2015, 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.

READ: Sh16bn Eurobond interest payment alarms Parliament

Ms Odhiambo reckons that the Treasury went ahead and paid the syndicated loan from the offshore accounts despite warnings from her office that the settlement would be in breach of Article 206 of the Constitution.

The Article requires that all government money be deposited in the Consolidated Fund Services (CFS) before approval for use is sought from the Controller of Budget.

“I told them in June that all monies raised or received by or on behalf of national government shall be paid to Consolidated Fund,” Ms Odhiambo said. “The Treasury brought us all documents pertaining to the syndicated loan and we gave approval that the debt can be retired.

However, the Treasury did not seek authority from CoB (Controller of Budget) to release funds.” She added that the Treasury can only operate the special account with the approval of the National Assembly.

The Controller of Budget’s office was created as an expenditure monitor to ensure money is spent for budgeted functions and to seal loopholes for fictitious payments that characterised the infamous Goldenberg scam.

The syndicated loan of $600 million (Sh54 billion) was borrowed from 13 international banks including Citi bank, Stanchart and Standard Bank.

Treasury PS Kamau Thugge earlier said the government had to make a choice between paying the syndicated loan directly from Central Bank’s account in New York and therefore save on foreign exchange losses and importing the money into the local exchequer account before being released by the Controller of Budget.

Treasury Secretary Henry Rotich on Thursday failed to appear before PAC to shed light on the payment.