Economy

Auditor General probes Sh7.7trn public debt

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Auditor General Nancy Gathungu. PHOTO | LUCY WANJIRU | NMG

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Summary

  • The Auditor-General has launched a comprehensive audit of Kenya’s public debt to determine the accuracy of the Treasury’s records of Sh7.7 trillion loans and whether they are being serviced in time.
  • Nancy Gathungu, the Auditor-General, says her office has finalised the June 2020 audit and started conducting the next round of yearly audits this month.
  • She told the Senate Finance committee her office was currently conducting a comprehensive performance audit specifically on public debt servicing activities.

The Auditor-General has launched a comprehensive audit of Kenya’s public debt to determine the accuracy of the Treasury’s records of Sh7.7 trillion loans and whether they are being serviced in time.

Nancy Gathungu, the Auditor-General, says her office has finalised the June 2020 audit and started conducting the next round of yearly audits this month.

She told the Senate Finance committee her office was currently conducting a comprehensive performance audit specifically on public debt servicing activities.

This entails confirming whether; the transactions are recorded accurately and completely and whether there is timely payment of the debt to avoid attracting penalties.

The June 2020 audit had revealed a Sh30 billion gap in the Treasury figures in bonds, bills and the government bank statements.

“We have currently obtained preliminary records on public debt as at 30 June 2021. However, we are in the planning stage of the audit and the current audit cycle is set to begin 1 October, 2021 after the statutory deadline for submission of financial statements by all public institution, the National Treasury included,” Ms Gathungu said.

The revelations come as the Treasury told Parliament it signed 10 new loans worth Sh293.5 billion between April 1 and August 31, 2021.

The Jubilee government has taken Sh293.5 billion in foreign loans in just seven months of this year, half of which will be paid by the next government due to extended grace periods.

The Auditor-General said the government had increased the stock of debt by 125 percent or Sh4.2 trillion in just six years, bringing the level of debt dangerously close to the set limits.

Currently the Sh7.7 trillion debt is 85 percent of the Sh9 trillion ceiling set by MPs in 2019.

Kenya has borrowed a cumulative Sh6.8 trillion over the last 20 years -- 84 percent of that since the Jubilee government took power in 2013 promising ambitious infrastructure projects.

President Uhuru Kenyatta’s Jubilee administration is set to have borrowed at least Sh6.1 trillion to implement his manifesto in 10 years in power having inherited slightly more than Sh1.79 trillion in June 2013.

Treasury chiefs project in a draft Budget Review and Outlook Paper new loans of Sh1.87 trillion in the two years to June 2022, meaning the Kenyatta administration will have borrowed Sh2.5 billion daily, pushing Kenya’s debt to Sh8.06 trillion.

The administration has ramped up spending since 2013 to build new roads, a modern railway, bridges and electricity plants, driving up borrowing to plug the budget deficit.

However, debt service is taking up more than half of tax revenues, leaving less money to run the government and finance development projects, schools and hospitals.

Even as the debt threatens to go through the roof, the auditor has raised queries over the accuracy of debt figures, noting a Sh30 billion variance in the 2020 financial year alone.

According to Ms Gathungu the Sh4.5 billion bank balance at the end of June 2020 was Sh1.8 billion short of the figure in Treasury’s ledger books.

There was Sh2 billion overspent in Treasury bills and a Sh26.2 billion variance in Treasury bond recorded at the summary statement of public debt and the recomputed closing balance.

“The over-redemption of Sh2 billion was not acknowledged by the Central Bank of Kenya and may therefore not be recoverable,” Ms Gathungu said.

There was also non-disclosure of public debt procured during the year 2019/2020.

Revelation of the debt gaps come at a time when Controller of Budget Margaret Nyakango also questioned how the loans were spent. The Controller of Budget said the Treasury reallocated Sh65.1 billion from a Sh70 billion-euro bond acquired on June 30, to fund counties and repay outstanding debt contrary to the provisions of the Public Finance Management Act, 2012.