Economy

Typing error saw Sh8.6bn allocation for non-existent State loan

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Ministry of National Treasury and Planning Cabinet Secretary Ukur Yatani. PHOTO | FRANCIS NDERITU | NMG

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Summary

  • The first Quarterly Economic and Budgetary Review indicated the Treasury paid Sh8.6 billion interest to the UK, putting total bilateral debt service at Sh41 billion.
  • The entry came despite Kenya having cleared direct loans owed to its former colonial master, the United Kingdom, in June 2020 after wiring Sh35.3 million to London and has not tapped any new debt from Britain.
  • In June last year, Kenya for the first time since Independence cleared direct loans owed to the UK, its former colonial master that has recently shifted how it lends to developing countries.

A typing error by the National Treasury has inflated the size of bilateral debt after Sh8.6 billion was included as part of repayment for a non-existent loan to the United Kingdom.

The first Quarterly Economic and Budgetary Review indicated the Treasury paid Sh8.6 billion interest to the UK, putting total bilateral debt service at Sh41 billion.

The entry came despite Kenya having cleared direct loans owed to its former colonial master, the United Kingdom, in June 2020 after wiring Sh35.3 million to London and has not tapped any new debt from Britain.

Officials said this was a typing error and the figure was supposed to be under Eurobond interest payments for the 10 and 30-year bonds borrowed in 2018, raising questions on the accuracy of data from the Treasury.

This rekindled the infamous typing error that could have added an extra Sh9.2 billion to a supplementary budget presented to Parliament in 2009 by Uhuru Kenyatta when he served as the Finance minister.

“It is a wrong classification of debt service on the table, it is supposed to be Eurobond payment, not UK debt,” said a source at Treasury who did not wish to be named.

The Treasury has since pulled down the Quarterly Economic and Budgetary Review from its website after Business Daily questioned the entry showing the country had paid the Sh8.6 billion to the UK.

In June last year, Kenya for the first time since Independence cleared direct loans owed to the UK, its former colonial master that has recently shifted how it lends to developing countries.

Data from the Treasury indicates that Kenya does not owe Britain as of June compared to a debt of Sh35 million in May and Sh1.4 billion in 2015.

The drop in direct loans from the UK emerged when the country opted to offer funds to agencies such as the Department for International Development (DFID) and the World Bank for onward lending to developing nations like Kenya.

The easing of UK direct debt to Kenya comes as countries like China have ramped up loans to African countries. Beijing has also used debt for geopolitical influence.

The DFID — renamed Foreign, Commonwealth and Development Office — and its investments institution CDC have been channelling loans directly to the private sector companies such as Athi River Mining, Brookside Dairy, Equity Bank, Garden City and M-Kopa Solar.

The Sh8.6 billion entry came at a time the Auditor-General has launched a comprehensive assessment of Kenya’s public debt to determine the accuracy of the National Treasury records of the Sh7.7 trillion loans.

Mrs Nancy Gathungu says her office has finalised the June 2020 audit and has started conducting the next round of yearly audits in October.

She told the Senate Finance committee her office is 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 repayment of the debt to avoid attracting penalties.

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

In 2009, Mr Kenyatta faced a storm after it emerged that a typing error added the extra Sh9.2 billion to a supplementary budget.

Mr Kenyatta, serving as finance minister, said there was no intention on the part of the Treasury to defraud taxpayers, terming the error that affected 200 line items as an oversight.

Then Parliament Speaker Kenneth Marende asked the House committee on finance to investigate the matter.

Anti-corruption campaigners said many Kenyan officials are corrupt and sometimes inflate numbers buried in unfathomable lists of figures. The State denied the accusation.

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