Attorney-General Githu Muigai has recommended urgent settlement of the Sh2.5 billion that Lake Basin Development Authority (LBDA) borrowed from Cooperative Bank to build a mall in Kisumu.
Prof Muigai has asked Devolution secretary Mwangi Kiunjuri to urgently address the matter to cut the Sh42 million monthly interest that the loan currently attracts.
In his advisory to the ministry and the Treasury, Prof Muigai terms the project as a landmark asset with potential to spur economic growth in the neighbouring areas “if proper management structures are put in place.”
“It is our view that the continued delay in honouring LBDA’s part of the bargain exposes the government and the organisation to legal liability with concomitant loss of public funds,” Prof Muigai stated in his letter dated January 31, 2017.
He added: “Accordingly, we advise that the various agreements executed are still valid and shall only be discharged upon payment of the contract amount based on final accounts and inclusive of accrued interest to the co-developer and settlement of the principal loan with Cooperative Bank.”
Last month, Auditor-General Edward Ouko echoed similar concerns and advised the Treasury and Devolution ministry to ensure that the loan is settled to save the Sh4 billion mall from being auctioned. A section of Nyanza MPs have expressed similar sentiments.
The AG said he reached the decision after considering the report on evaluation of the funding request for the mall dated September 2016, as well as tender documents and reports prepared by the State department for public works in August 2016.
In a report dated January 24, 2017, Mr Ouko recommended that the Treasury and the parent ministry should ensure that the Cooperative Bank loan and co-developer dues are paid in full as soon as possible.
“The Treasury should release budgetary allocations to LBDA to enable it meet its financial obligations including pending bills to the contractor and the bank,” states the report.