The Eurobond Scam was conceived by Government as an avenue for external borrowing to facilitate the financing of major projects and also to generate financial capital to meet the deficit between what the government takes in by way of taxes and what goes out in each financial year by way of public expenditure.
Such public debts are national debts which are paid back in a long period of time and eventually affect every citizen; born and not born at the time of acquiring the debt. It is this expanded relationship between the lender and the citizens that makes scrutiny of the public debts critical before and after acquisition.
Government borrowings have a fixed maturity period which means that they are not payable on demand. One advantage of public borrowing is that they do not create inflation but instead ease pressure on domestic borrowings thereby stabilizing the lending rates.
Public debts, however, have a huge impact that affects the economy as a whole. Consequently, Public debt needs to be critically analyzed and evaluated at all-times with respect to the national GDP. Rising public debt affects the amount of money the nation has at its disposal for savings.
The implication therefore is that the higher the public debt, the lower the marginal propensity to save and vice-versa. Such a country will be at risk of over-reliance on other countries with surplus money to spare. National borrowings to pay off deficits have the potential of creating higher interest rates which would affect the capacity of the nationals to acquire loans for investment. The result therefore would be stagnant economic growth.
In the case of Eurobond, the idea initially but mischievously appeared to be a great thing. The agenda of raising funds for the government through a sovereign bond appeared enticing since it was expected to subsequently stabilize the interest rates and reduce pressure on the Kenya shilling against the hard currencies.
It was also expected to limit the pressure on domestic borrowing. However, the issue of the Eurobond became suspect first as a result of its subscription. The government immediately went in for more debts increasing the amount by $750 million. The cost of these debts had immediate effect on the Kenyan shillings against the dollar. The lending rates locally went up when the banks correspondingly adjusted their lending rates upwards.
Secondly, further suspicion on the Eurobond emanated from the duration it took to be realized. The time span between the issue and the time of realization led to the thinking someone was unfairly benefiting from the proceeds of the deposited amount by way of interest.
One year appeared to be too long a time for the effect to be realized. This also tended to suggest that there was no urgency in raising the funds. The amount of interest that was earned from the Eurobond transaction rightfully belongs to Kenyans and must therefore not only be fully-disclosed but also aptly accounted for.
The third reason why the issue of Eurobond is an outright fraud is the lack of budget lines for which the amount was raised. For proper control and prudent fiscal discipline, it is vital to clearly define the budget lines for which funds were being raised and how much money is required thereto rather than merely giving open Cheques to line Ministries in total disregard to public good.
As it stands, money was merely being released to government officers to use and give feedback afterwards. Suggestively, the line Ministries and State departments were left free to decide what to do with the money. Such gaps were certainly meant to create avenues for siphoning out the proceeds. Infact, word doing round is that the Eurobond proceeds was received on a Friday and subsequently siphoned out at lightning speed the following Monday
There are several questions that remain begging for answers. For example; Kenyans need to be told how much money was intended for which Ministry/Department, for what purpose and exactly how much was eventually released to them.
Secondly, is the purpose for which the Eurobond issue was made being achieved? Thirdly, the Government must comprehensively and commensurately explain who the arrangers for the Eurobond issue were and how much fees was paid for their service? Kenyans must also be told the considerations taken for complexity and risk factors which could have increased the risk fees.
And finally Kenyans should be told if there were any provisions for revision and amendments from time to time since loan documents are flexible. In the absence of satisfactory answers to these pertinent questions, the Eurobond issue remains the greatest scandal in post-independent Kenya, for which Uhuru Kenyatta’s Government must be accountable.