We are in the middle of the season of the usual ritual of political manifestos. The Azimio coalition has come up with pledges that are bound to cost Kenya hundreds of billions of shilling in new spending annually.
But where is the fiscal space? Azimio is counting on reaping dividends from an aggressive anti-corruption programme, bold procurement reforms and a raft of other institutional reforms — the most ambitious of which is a plan to establish an Office of Management of the Budget, a similar office in the White House in the US.
Azimio is also promising to make the restructuring of public debt a high priority agenda. I think they are on point because corruption is why we have accumulated mountains of expensive commercial debts in our books.
In 2017 alone, the energy sector accumulated a series of loans with Exim Bank China amounting to $2 billion.
Today, the biggest scandals you encounter as you scrutinise our external debt register are the prohibitively high-interest rates we are paying on some of the syndicated loans that — in some cases — go as high as nearly 10 percent.
Who else pays these types of interest rates on the US dollar in the world today? How did we end up with these loans in our books? Were the international banks and arrangers we appointed to procure these loans chosen competitively?
Azimio is on point in putting the spotlight on this area because international bankers and the arrangers have been making a killing by colluding with corrupt elites of poorly managed economies in Africa to saddle poor countries with opaquely arranged syndicated loans.
We all saw what happened in Tanzania where it was discovered that arrangers in a syndicated loan transaction had surreptitiously jerked up arrangement fees to factor in kickbacks and backhanders for corrupt government officials.
The arrangement fees, which international banks earn on syndicated loans are used as conduits to make payments to corrupt elites.
The Azimio coalition must be prepared to go beyond merely promising to restructure our debts. They should tell us that they will demand a thorough and independent audit of our external debt register before approving any more increases on the public debt ceiling.
Why do I maintain that presidential candidates must promise us an independent audit of the external debt register? Incompetent public debt recording and reporting have emerged as an area prone to corruption in Africa.
We have read sensational tales about how corrupt Africa elites have been colluding with unscrupulous European creditors to manipulate data in external debt registers and conceal fraudulent debt transactions abound.
In Mozambique, two large previously unreported and hidden external loans were revealed only after an independent audit demanded by the International Monetary Fund was conducted.
The infamous Tuna bond scandal in Mozambique showed just how corrupt elites have mastered the art of manipulating external debt data to hide dodgy loans.
Independent audits of external debt registers of several African countries, including the Democratic Republic of Congo, Togo and Nigeria, also revealed largely hidden and previously unreported loans.
In Kenya, we do an extremely sloppy job when it comes to compiling and recording debt data in our external debt register.
Just download the latest external debt register on the website of the Treasury and you will find that standards are dismally low when it comes to disclosure and transparency in public debt recording and reporting.
Our external debt register is opaque and provides inconsistent and incomplete information on important details.
The only information disclosed on these debts is that they were borrowed for ‘various security-related contracts’.
Presidential candidates should also promise to get us out of ‘Eurobondage’.
It begs the question: If information as basic as what has been paid to service a loan is not provided, how can you vouch for the integrity of the data? Then there are cases of major inconsistencies in the recording of data on tenures of loans.
There are several cases where details on huge loans for security projects are recorded important details such name of the creditor, interest rate, repayment terms, and reasons why the money borrowed.
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