Hunt for thieves in debt register

Parliament should demand a thorough and independent audit of our external debt register before approving any more increase to the public debt ceiling, now at Sh9 trillion.

The register is your single source of truth when you want to interrogate the integrity and accuracy of data and facts on the expensive foreign loans responsible for the runaway external debt situation we find ourselves in today.

It is where you expect to find updated data on names of creditors and basic portfolio indicators such as maturities of loans and repayment schedules.

I say MPs must insist on an independent audit because public debt recording and reporting is emerging as an area prone to corruption in Africa. Sensational tales about how corrupt the continent’s 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 (IMF) was conducted. Indeed, the infamous Tuna bond scandal in Mozambique showed just how corrupt elites have mastered the art of manipulating external debt data to hide dodgy debts.

Independent audits of external debt registers of several African countries, including DR Congo, Togo and Nigeria, also revealed large hidden and unreported loans.

Kenyans could be quite exposed and vulnerable to hidden external debts in our records as we do a very poor job at recording and reporting external debt data. 

Just download the latest external debt register on the National Treasury website and the inescapable conclusion you will arrive at is that our standards are dismal when it comes to disclosure and transparency in public debt recording and reporting. 

If anything, the latest published external register on the website is outdated since it only provides information on loans outstanding as at June 30, 2018.

Opaque, inconsistent and incomplete is how I summarise our external debt register. Indeed, the sheer incompetence and sloppiness with which this critical data is disclosed and presented is simply astonishing.

Allow me to explain. 

Basically, the information in the latest register is recorded in columns with data on the following: The name of the creditor, purpose for borrowing the loan, interest rate, repayment terms, cumulative amounts repaid and, finally, the amount outstanding as at June 30, 2018.

Glaring gaps

Yet as you interrogate the data in the register more closely, you will see glaring gaps. First, you find several cases where the column for cumulative amounts paid in servicing some of the loans are left blank.

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. For example, I came across instances where the column that is supposed to contain information on the tenures and schedules of repayment of loans is blank and others where the information provided is completely vague.

Fraudulent debt transactions can be hidden easily due to the opaque way data on security contracts is recorded in the external debt register.

I picked up an interesting example of dodgy reporting. In two massive Euro-denominated debts, we had an outstanding balance of a whopping Sh16 billion as at June 30, 2018 were recorded in the register without important details such as the name of the creditor, interest rate, repayment terms and purpose of borrowing the money. 

The only information that was disclosed is that the money was borrowed for “various security-related contracts”.

Which begs the question: If you are allowed to get away with not recording facts as basic as the name of the creditor, what would stop corrupt elites from hiding dodgy debts by recording them in the register as ‘various security-related contracts’?

Finally, two revealing titbits I came across in the register.

We all know that the Israeli company we contracted to build the Galana-Kulalu irrigation scheme abandoned the project without finishing the job. Despite that, it is recorded in the register that we are still obligated to repay the huge $71 million (Sh7.1 billion) loan that we borrowed for this project to the Israeli creditor, Bank Leumi Le Isreali, until September 2033.

The Itare dam project stalled four years ago. Yet I read in the register that, as at June 30, 2018, the outstanding balance on the loan that we borrowed for the project was a massive Sh15 billion, which we must continue paying to the Italian creditor, Intesa Sao Paolo, until September 2034.
The thieves are hiding in the register.

[email protected]