The East African nation of Kenya has reportedly defaulted on the repayment of the 19.6 Billion Kenyan Shilling loan received for the Arror Dam and Kimwarer Dam after being unable to make the first installment payments to Italian Bank; Intesa San Paolo in May of 2021.
The Treasury documents which were brought before the Kenyan Parliament revealed that Kenya was to pay the first installment of the 11 billion Kenyan Shilling loan received for the Arror Dam by the 18th of May 2021. For the 8.63 Billion Kenyan Shilling loan received for the Kimwarer Dam, its initial repayment was to be carried out on the 9th May 2021.
According to the Italian Bank; Intesa San Paolo, Kenya has not been able to carry out the payments at a time when investigations are being carried out regarding the billions of Kenyan Shillings which were disbursed in overseas banks but never sent to the accounts for the Kenyan government.
According to Business Daily Africa a representative of the bank; Intesa San Paolo who did not want to named made it known via an email response that, “No payments have been made in 2021.”
The records which were brought before the Kenyan Parliament also revealed that the Treasury is yet to make payments for the loans provided for Arror Dam and Kimwarer Dam.
In reference to the Kimwarer Dam debt the Treasury stated that, “Loan of Eur 258,688,881.72 (Sh33bilion) repayable in semiannual instalments commencing 9th May 2021 and ending on 9th November, 2035.”
Regarding the Arror Dam debt the Treasury documents stated that, “Loan of Eur 319,620,697.07 (Sh40.8 billion) repayable in semiannual instalments commencing 18th May 2021 and ending on 18th November, 2035.”
As at the time of putting this article together the Treasury had not yet made any comments regarding the payments which had not been made to Intesa San Paolo.
One of the risks whenever a country defaults on foreign loans is that International Investment Funds would avoid the country when it comes to providing loans.
If said International Investment Funds decide to go ahead with providing the loans, they would request for a higher return on the loans in order to adequately compensate them for the added risks involved.
Analysts believe however, that the current non repayment of the loan should not be looked at striata a default due to the court action and still ongoing probe regarding the suspected irregular transfers of the billions of Kenyan Shillings, as well as the alleged misuse of funds intended for both the Arror Dam and the Kimwarer Dam.
According to Business Daily Africa one analyst who works at one of the leading commercial banks and preferred anonymity made it known that, “The guess is that the failed payments could be linked to the scandal involving advance payments for two dam projects. This does not amount to a straight default that comes from lack of resources.”
In July of 2019 Henry Rotich who is the Former Treasury Cabinet Secretary was along with a number of senior officials charged with a number of crimes including conspiracy to defraud the public.
As much as 19.8 billion Kenyan Shillings had been paid in advance to numerous offshore companies for the Arror Dam and Kimwarer Dam projects even though said dams had not been constructed.
By September of 2019 President Uhuru Kenyatta cancelled the Kimwarer Dam project after an investigation revealed that the project was financially and technically not doable.
President Uhuru Kenyatta also ordered the commencement of construction for the Arror Dam project at half the costs after the technical committee he had appointed to assess it development revealed that it was indeed economically feasible.
The Italian bank; Intesa San Paolo stated that Kenya stopped making any requests to withdraw anymore from it after the cancellation.
In the words of the bank representative, “For any such financing disbursements are made only after a request of the borrower. Once the investigations began, we did not receive any requests and no further disbursements were made.”
The former Treasury Cabinet Secretary; Mr. Henry Rotich has been accused of assisting the irregular offshore payment of 11 Billion Kenyan Shillings to an Italian insurance company that was somehow involved in the loan deal in question to finance both the Arror Dam and the Kimwarer Dam. This led to rising concerns that kickbacks may have been given to the officials who were involved in the projects.
The court filings by the Director of Public Prosecutions (DPP); Noordin Haji revealed that Mr. Henry Rotich aided the direct payment of the amount in question, to Italian insurance company; SACE Insurance. This is non in accordance with the law which requires that payments be processed through the consolidated account in Kenya.
According to Section 50 (7) of the Public Finance Management Act (PFMA) all public debt must be paid into the consolidated fund at the Central Bank of Kenya (CBK) and any expenditure that comes up subsequently, must be approved by the Controller of Budget (CoB) to ensure transparency and accountability.
The Kenyan government believes that the move to bypass transferring the fund to the consolidated fund at the Central Bank of Kenya (CBK) was done in order to carry out the payment of kickbacks and bribes.
Gilbert Kitalia who is an officer with the Directorate of Criminal Investigations revealed in the court filings that, “SACE collected the Sh11 billion from the four private commercial Italian banks and lenders (of what is falsely alleged to be a Government-to-Government loan) posed as having loaned the GOK the said money but instead of releasing the funds to GOK as required by our Constitution and our law, the applicant as Cabinet Secretary for Finance allowed and assisted SACE to pay themselves. The funds never saw a Kenya government bank account or the Consolidated Account.”
The Director of Public Prosecutions (DPP); Noordin Haji says Mr. Henry Rotich paid no attention to the requirements of the Public Finance Management Act (PFMA) and “willingly turned a blind eye” to the irregular payment deal with the Italian insurance company; SACE Insurance a payment deal which eventually led to fed flags and concerns regarding his intentions.
According to Business Daily Africa the Kenyan government carried out advance payments of 19 billion Kenyan Shillings including the 11 billion Kenyan Shillings in debt insurance that was not necessary and which prosecutors believe was transferred to accounts that belonged to the various conspirators and their agents.
Mr. Gilbert Kitalia of the Directorate of Criminal Investigations added via court filings that, “This is an express and very serious breach of the law. It is also a necessary component of the conspiracy and the crimes alleged and gives life to the same since by bypassing the consolidated fund, payment of all kickbacks and the distribution of all proceeds of the crimes was made exponentially easy.”
There have also been a number of concerns that the contractor; CMC Di Ravenna- Itinera JV had been hit with bankruptcy even after said contractor had received 7.2 billion Kenyan Shillings in advance payment for the project.
Evidence which has been brought before the court showed that on the 2nd of July 2018 the sum of 3.5 billion Kenyan Shillings was approved as advance payment to CMC Di Ravenna- Itinera JV for Kimwarer Dam. On the 27th of September 2018 it; CMC Di Ravenna- Itinera JV, received the sum of 4.3 billion Kenyan Shillings as advance payment for Arror Dam.
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