The Eurobond mystery, and why the ghosts have refused to go away

On June 25, 2014, President Uhuru Kenyatta addressed the nation from State House, Nairobi, and announced that the country was to receive an initial Ksh.174 billion of what would eventually be a Ksh.250 billion international sovereign bond , also known as the Eurobond.

The Eurobond proceeds were meant for general budget support, including funding of infrastructure and repayment of a syndicated loan.

The move was also seen as a way to keep government out of the local debt market and subsequently lower interest rates for Kenyans.

And then followed a pledge by President Kenyatta: “I want to assure you that the government will spend this money prudently.”

From July 2014, various amounts were disbursed from the Sovereign Bond Account to the National Exchequer Account.

According to records from the Auditor General, between July 2014 and July 2015, a total of Ksh.196.9 billion had been transferred to the National Exchequer. The remaining Ksh.53 billion went to the repayment of a syndicated loan that was obtained in 2012.

But pointed questions on how the rest of the funds were spent, began to emerge.

Opposition leader Raila Odinga was the first to cast doubt, in a statement sent to newsrooms in October 2015 saying: “Kenya’s economy cannot absorb that kind of money in one year. It is too much. If it was used to build infrastructure, we would be seeing those infrastructure developments.”

A year later hopes that the economy would improve with this new injection were fading away.

By 2015, interest rates that were supposed to have dropped were hitting a record high of more than 18%, the value of the Kenya Shilling against the dollar fell from 87 in 2014 to 102 in 2015.

Meanwhile, Odinga continued to pile pressure on government, saying in December 2015 that: “Hiyo pesa ilijenga barabara gani? We spent Ksh.30 billion to build Thika highway, so the question remains where did the other Ksh.140 billion go?”

The Treasury was at pains to explain, then Cabinet Secretary in charge of the docket Henry Rotich saying: “I don’t understand why it takes so long to explain this, and the time it is consuming us to do very many important things rather than keeping on raising this. There is no money missing.”

Rotich gave a further breakdown on where some of the Ksh.196.9 billion went. He stated that Ksh.64.4 billion went to infrastructure, Ksh.44.6 billion went to planning, Ksh.21.07 billion to energy and petroleum, Ksh.15.06 billion to water and irrigation, and another Ksh.14.21 billion was given to agriculture.

“The ministries are compiling the very specific projects that they applied on the money that we released to them,” he added then.

The only explanation from a government official on specific projects that benefited from the Eurobond proceeds came from the Ministry of Energy.

Then Energy PS Dr. Joseph Njoroge said: “Ksh.21 billion has already been allocated to us and it has been used on very many projects; school electrification, transmission lines, geothermal exploration and drilling, all that.”

The specific amounts allocated to each of those projects was however still not clear.

This drew in the Ethics and Anti-Corruption Commission (EACC) that grilled the then Treasury CS and his Principal Secretary Kamau Thugge.

The allegations of misappropriation angered the President who issued a warning to naysayers during the 2015 December Jamhuri Day Celebrations.

“Let me reflect on the Eurobond; ours was one of the best issues ever on the African continent, yet some of us contrive to talk it down. If you make accusations and fail to prove them, you too will also be held accountable,” said the Head of State.

Odinga, on the other hand, continued to pile pressure, this time naming individuals he claimed were involved in the graft allegations. 

In January 2016, the opposition leader said: “I will not rest until we get to the bottom of this Eurobond matter.”

As the political tug of war played out, investigations by the Auditor General and his team were extended to the UK, the United States and Qatar.

Then Auditor General Edward Ouko in May 2016 said: “If a ministry says we have spent this much on development, we don’t take it on the basis that they’ve confirmed they spent it, we need to countercheck.”

By September 2016, a report by the Auditor General revealed that Ksh.215.5 billion from the Eurobond proceeds could not be accounted for.

In an earlier report, the Auditor General said the State Department of Water could not account for some Ksh.11.2bn it received from the Eurobond proceeds. 

The allegations kept the Executive on the defense.

Deputy President William Ruto, in a Citizen TV interview on December 22, 2016, said: “The issue about Eurobond money being stolen, my friend, is utter nonsense.”

Investigations continued into 2018, the same year Kenya raised another Ksh.202 billion through a second Eurobond. At the time, the International Monetary Fund (IMF) was warning Kenya about its debt burden that stood at Ksh.4.8 trillion.

Still, in 2019, Kenya issued yet another Ksh.200 billion plus Eurobond. The pressure to raise funds heightened as the country would have about Ksh.1.1 trillion of its debt stock matures in a year’s time (2020).

And in that same year, 2019, the Auditor General’s investigations into the 2014 Eurobond saga came to an end, with a Special Audit Report concluding that the proceeds had indeed been deposited in the National Exchequer Accounts.

However, the big question on the utilization of the first Eurobond proceeds could not be answered. The report showing that none of the funds could be traced to specific development projects.

In addition, the Auditor General found that some of the funds were expended outside of the government’s Integrated Financial Management Information System. 

His final recommendation was that issuance of future international sovereign bonds be attached to specific development projects; whether that was followed in the second and third Eurobonds is not known.

That’s your National Reminder, lest you forget.


Eurobond President Uhuru Kenyatta Raila Odinga National Treasury Edward Ouko

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