President Mwai Kibaki leaves Harambee House. The country’s public debt rose by 22 per cent from Sh806 billion as at June 30, 2008 to Sh983 billion the same period in 2009. Photo/FILE
Each of the 38.6 million Kenyan bears a debt of at least Sh25,478 according to the latest Controller and Auditor-General’s report.
The country’s public debt rose by 22 per cent from Sh806 billion as at June 30, 2008 to Sh983 billion the same period in 2009.
The net increase of Sh177 billion during the year was mainly attributed to disbursements of new loans to the Government by various development partners and additional borrowings from the domestic market through Treasury Bonds and Bills.
However, these figures are likely to have changed since July 2009, the time the Controller and Auditor-General’s report refers.
A Treasury bulletin in April this year indicated that the country’s public debt had increased by 0.81 per cent to Sh1.18 trillion.
Ministries of Agriculture, Water and Irrigation and Energy are among 11 ministries that recorded the biggest increases in outstanding loans.
Loans outstanding under Ministry of Agriculture and Rural Development increased from Sh2.8 billion as at June 30, 2008 to Sh5.5 billion in the corresponding period last year.
The increase has been attributed to additional loans granted to Pyrethrum Board of Kenya, Coffee Board of Kenya and Horticultural Crop Development Authority totalling Sh2.7 billion, and loan repayments of Sh42 million.
The Public Debt balance includes a balance of Sh3.6 billion due to an Austrian company of Bawag and a Belgium entity of Ducroire respectively, on account of KeN-Ren Chemical and Fertilizer Company Limited.
The fertiliser project was initiated by the defunct KeN-Ren Chemicals and Fertilisers Limited Company at a cost of Sh441 million.
In the early stages, it was to provide technology to manage the company, organise purchase of equipment and machinery, and construct a fertiliser factory.
The audit found that Austrian firm Bawag is owed Sh1.2 billion while Ducroire of Belgium is owed Sh2.4 billion respectively.
The debts arose as a result of a joint venture entered into in the mid 1970’s between the Government and an American firm known as N-Ren Ltd, to form a company called Ken-Ren Chemical and Fertilizer Limited.
Ken-Ren was to manufacture fertilizers for domestic and export markets. At the time, President Kibaki was the minister for Finance.
According to information available to the Kenya National Audit Office, Ken-Ren entered into several financing and equipment procurement contracts with various Austrian and Belgium banks and suppliers, with the Government of Kenya being the guarantor.
These contracts were dishonoured as no factory was put up to manufacture the fertilizer as planned.
As a result, the Government as a guarantor was sued by the foreign firms at the International Chamber of Commerce (ICC) Court for breach of contract, where, and after protracted proceedings, the final awards were made in favour of the firms.
“The Government agreed and signed a debt re-structuring agreement dated November 14, 2000 with the Austrian company, to facilitate settlement of the principal debt due of Sh1.9 billion (€16.6 million) at an annual interest rate of 1.5 per cent.
“Repayments for the debt commenced in October 2003 and were scheduled for completion in March 2010.”
For Ducroire, the re-scheduling agreement for Sh3.7 billion runs until June 2015 from July 2004.
The audit shows that by June 2009, the government had paid Sh2.4 billion made up of principal and interest amounts of Sh16 billion and Sh732 million respectively.
“However, and as observed in the preceding paragraphs, no fertilizer factory had been constructed, thus making the entire expenditure of Sh2.4 billion nugatory.”
Source: Daily Nation
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