Kenya Orders That Report on Eurobond-Spending Probe Be Filed

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Kenya’s public prosecutor ordered the anti-graft agency to submit a report on allegations about how the proceeds of the East African country’s debut Eurobond was spent within 10 days.

Kenya’s main opposition Coalition for Reforms and Democracy, or CORD, on Tuesday said that the government can’t account for more than 140 billion shillings ($1.4 billion) of the money received when it sold $2.75 billion in last year. Treasury Secretary Henry Rotich said on Oct. 29 the funds are fully accounted for.

The Ethics and Anti-Corruption Commission and the Directorate of Criminal Investigations are both probing the allegations, Keriako Tobiko, the head of the Office of the Director of Public Prosecutions, said in an e-mail Wednesday. He directed the agencies “to interrogate, record statements and obtain evidence from all parties concerned and forward the completed file to my office within 10 days,” Tobiko said.

President Uhuru Kenyatta last month described graft in Kenya as a national security threat that enables Islamist militants to plot attacks in the country. The nation ranks among the world’s 30 most-corrupt countries, placing 145th out of 177 on the Berlin-based Transparency International’s 2014 Corruption Perceptions Index.

A gauge of the nation’s dollar bonds has lost 1.2 percent since the end of October, more than the average 0.5 percent decline in Bloomberg USD Emerging Market Sovereign Bond Index. Yields on Kenya’s $2 billion of notes due in June 2024 climbed 218 basis points this year to 8.37 percent on Tuesday, partly due to the Federal Reserve preparing to increase interest rates for the first time since 2006, damping demand for riskier assets.

Corruption Scandals

Kenya sold the debt to raise funding for spending on infrastructure including a new railway from the port of Mombasa to Nairobi, the capital. The opposition party said there is a “lack of evidence” of where and if the government spent more than $1 billion.

Given the “contradictory statements of officials, and the very obviously cooked accounts emerging from different official departments, we are forced to the alarming and unprecedented conclusion that once again Kenyans are victims of a single case of theft that is without precedent in our history,” CORD said in an e-mailed statement.

CORD leader and former prime minister Raila Odinga turned down a Treasury invitation to scrutinize documents on the Eurobond and instead asked officials to make the paperwork public.

Odinga is “happy to note that the information is available, but regrets that the same information has been unnecessarily withheld not only from the general public but also the National Assembly’s Public Accounts Committee,” according to an e-mailed statement.

Previous corruption scandals in Kenya include a scheme know as Anglo-Leasing, which involved the payment of a series of security contracts to non-existent companies in the late 1990s and early 2000s, for goods and services that never were delivered. The Treasury said last year the scam cost 56.2 billion shillings.

In the 1990s, the Kenyan government lost almost $1 billion in the so-called Goldenberg scandal that involved the fraudulent export of gold and diamond jewelry.

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