As of April 2022, the outstanding public debts publicised by Central Bank of Kenya was Ksh. 8,470,377,843,000.00. This amount comprised of:
What is public debt?
Public debt as provided under Article 214(2) of the Constitution of Kenya means all financial obligations attendant to loans raised or guaranteed and securities issued or guaranteed by the national government.
1. Public Debt is anchored in the budget.
The budget is provided under Article 220(1) of the constitution of Kenya which states that: Budgets of the national and county governments shall contain—
(a) estimates of revenue and expenditure, differentiating between recurrent and development expenditure.
(b) proposals for financing any anticipated deficit for the period to which they apply; and
(c) proposals regarding borrowing and other forms of public liability that will increase public debt during the following year.
In simple terms public debt is in the budget and the budget is in two forms:
1. Budget for Development: This is where all money for development projects is allocated (Development Appropriations act). This is funded through Taxes, grants, and Loans (debt).
• section 15(2) of the Public Finance Management (PFM) Act 2012 provide that “over the medium term, the national government’s borrowings shall be used only for financing development expenditure and not for recurrent expenditure”.
• section 50(3) of Public Finance Management Act, 2012 provide that, “the national government may borrow money only for the budget as approved by Parliament and the allocations for loans approved by Parliament”.
2. Budget for Recurrent: This is where all the moneys for repayment of loans are allocated (Recurrent Appropriations act). This is funded through Taxes only.
Why do we incur public debts?
We incur debts to finance development projects! For the eight financial years, 2014/2015 to 2021/2022 the development projects budgeted totalled to Ksh. 5,362,366,308,605 which were financed through tax revenue and grants totalling to Ksh. 3,361,204,649,773.00, and debt totalling to Ksh. 2,001,161,658,832.00 authorised under the respective Appropriation Acts of 2014/2014 to 2021/2022 financial years. The table below shows the development budget for every financial year.
1
*Tax Revenue totalled Ksh. 2,978,611,786,799.00
*Grants totalled Ksh. 382,592,862,974.00
The Table shows the gross expenditure estimates (Appropriation Acts) for development projects totalling to Ksh. 5,362,366,308,605 and the source of finances for the development projects which comprised of tax revenue totalling to Ksh. 2,978,611,786,799.00, grants totalling 382,592,862,974.00 and debt totalling to Ksh. 2,001,161,658,832.00. These were the amount authorised by the Presidential warrants to be withdrawn from the consolidated fund for the eight financial years; 2014/2015 to 2021/2022 to pay for the development projects.
The graph shows the gross development expenditure estimates against the amount financed by tax revenue and amount financed by external debts
As a Kenyan If I want to know the debt of my Country, where do I go?
Article 206. (1) of the Constitution of Kenya state that there is established the Consolidated Fund into which shall be paid all money raised or received by or on behalf of the national government.
Who hosts the consolidated fund?
The Public Finance Management Act section 17. (1) The National Treasury shall administer the Consolidated Fund in accordance with Article 206 of the Constitution.
(2) The National Treasury shall maintain the Consolidated Fund in an account to be known as the National Exchequer Account, kept at the Central Bank of Kenya and shall, subject to Article 206(1) of the Constitution—
(a) facilitate payment into that account all money raised or received by or on behalf of the national government; and
(b) pay from that National Exchequer Account without undue delay all amounts that are payable for public services.
The CBK publicises the public debts on their website monthly.
1. AMENDEMENT OF THE CONSTITUTION OF KENYA 2010 THROUGH AMENDING PFM ACT 2012
Unauthorized loans were made possible through amendment of the constitutional requirement under Article 206(1) of the 2010 Constitution of Kenya that require all receipt from loan money be paid into the consolidated fund by the 2014 amendment of the Public Finance Management Act, 2012. The amendment of the PFM Act introduced two exceptions not provided for under Article 206 of the 2010 constitution of Kenya 2010
Article 206 of the 2010 Constitution of Kenya
206. (1) There is established the Consolidated Fund into which shall be paid all money raised or received by or on behalf of the national government, except money that—
(a) Is reasonably excluded from the Fund by an Act of Parliament and payable into another public fund established for a specific purpose: or (b) May, under an Act of Parliament, be retained by the State organ that received it for the purpose of defraying the expenses of the State organ.
INCONSISTENCIES;
Exceptions (c)&(d) were not provided for under Article 206 of the constitution of Kenya 2010 and hence the amendments conflicted with the Constitution.
Original Public Finance Management (PFM) Act 2012
provided that, “The Cabinet Secretary shall ensure that the proceeds of any loan raised under this Act are paid into the Consolidated Fund or into any other public fund established by the national government or any of its entities as Cabinet Secretary may determine in accordance with regulations approved by Parliament”
CONSISTENCY;
Article 2(4) of the Constitution of Kenya 2010 provides that: (4) “Any law, including customary law, that is inconsistent with this Constitution is void to the extent of the inconsistency, and any act or omission in contravention of this Constitution is invalid”.
Amended Public Finance Management (PFM) Act 2014
c) disbursed directly to the suppliers where the loan is a government-to-government loan and is raised for the purpose of financing goods and services provided by a supplier outside Kenya
(d) in the case of an external loan or external government security, applied, in part, to pay at closing, pre-negotiated expenses associated solely and exhaustively ‘with the borrowing, including but not limited to, the fees, commissions and expenses of lenders, financial arrangers, managers and book runners, fiscal agents, trustees, paying agents, exchange and information agents, syndicate agents, counsel, clearing systems, listing agents, and stock exchanges, rating agencies and other expenses of a similar nature arising from the external loan or external government security.”
6,100,122,026,000.00 2,001,161,658,832.00 4,098,960,367,168.00
The table shows Ksh. 4,098,960,367,168.00 debt were not authorised by the Appropriation Acts; Hence, the debts were borrowed outside the public financial management system falling thus short of being public debt.
Bar Graph 2
The graph shows the public debt as per CBK data against the public debt authorised by the Appropriation Acts and the over borrowings.
Appropriation Acts (Gross development expenditure estimates) VS Public debt as per CBK data.
Table 3
3,361,204,649,773.00
debt 4,098,960,367,168.00
Graph 3
The graph shows the public debt as per CBK data against the gross expenditure estimates captured under Appropriation Acts.
4
2,001,161,658,832.00
This table shows domestic debts as per CBK data totalling Ksh. 2,941,516,156,000.00 whereas there were no debts authorised under the Appropriation Acts.
Graph 4
The graph shows domestic debts as per CBK data against Appropriation Acts (No domestic debt authorised under the Appropriation Acts).
The Table shows unauthorised external debts Ksh. 1,814,331,441,168.00 which cannot be linked to the budgeted projects
Graph 5
How is our Public Debt paid?
The Public debt are paid from Tax revenue which is budgeted under Recurrent Appropriation Act (Budget).
The constitution of Kenya Article 214(1) provide that the public debt is a charge on the Consolidated Fund, but an Act of Parliament may provide for charging all or part of the public debt to other public funds.
Section 50(6) of the PFM Act 2012 provide that A public debt incurred by the national government is a charge on the Consolidated Fund, unless the Cabinet Secretary determines, by regulations approved by Parliament, that all or part of the public debt is a charge on another public fund established by the national government or any of its entities.
Regulation 112(1) of the PFM Regulations 2015 provide where the Constitution or an Act of Parliament provides for some specific categories of expenditure to be a direct charge on the Consolidated Fund, such expenditures shall be included in the recurrent budget estimates of the national government as part of the Consolidated Fund Services.
(2) the Consolidated Fund Services shall be provided for in the recurrent estimates but shall not be subject to Parliamentary debate nor to the expenditure limited by estimates nor vote on account.
Public Finance Regulations 2015, regulation 21:
21(1) Once the Annual Appropriation Bill or Supplementary Bill has been assented to, the Cabinet Secretary shall obtain presidential warrants authorizing issues from the Consolidated Fund in accordance with the respective Appropriation Acts.
(2) The Presidential Warrants in paragraph (1) of this regulation shall be transmitted to the Controller of Budget by the Cabinet Secretary to authorize withdrawals in accordance with Article 228 of the Constitution.
Kibaki’s Outstanding public debt brought forward -2,370,255,820,000.00 This what should be outstanding debt balance -2,844,788,408,938.00
*Although CBK publicised debt is Ksh. 8,470,377,843,000.00 as at April 2022.
The table shows that the public debt expenditure totalling Ksh. 5,625,589,437,062.00 was set aside in the Recurrent Appropriation Acts to repay public debt as per CBK data (which includes unauthorised debt) totalling Ksh. 6,100,122,026,000.00. The allocation would have covered the public debt as per CBK data including outstanding public debt brought forward as of June 2014 amounting to Ksh. 2,370,255,820,000.00 leaving outstanding debt totalling Ksh. 2,844,788,408,938.00.
Graph 1
The graph shows the amount allocated for payment of debt against the amount of debt as per CBK public debt data. Table 2
The table shows that public debt expenditure totalling Ksh. 5,625,589,437,062.00 was set aside in the Recurrent Appropriation Acts to repay public debt authorised by the Development Appropriation Acts totalling Ksh. 2,001,161,658,832.00. The allocation would have covered the authorised public debt and the outstanding public debt brought forward as of June 2014 amounting to Ksh. 2,370,255,820,000 leaving credit balance of Ksh. 1,254,171,958,230.00. There was no need of incurring debts since the tax revenue of Ksh. 5,625,589,437,062.00 set aside for repayment of the public debts was sufficient to finance the budgeted projects.
In reference to table 2 above, presidential warrants were issued to withdraw Ksh. 5,625,589,437,062.00 to pay debts of Ksh. 2,001,161,658,832.00.
The graph shows the amount allocated for payment of debt against the amount of debt authorised under the Appropriation Act
How the Ksh. 5.6 Trillion tax revenue was Spent?
As was indicated earlier public debt is a direct charge on the consolidated funds services. The recurrent Appropriation Acts for the respective financial years, 2014/2015 to 2021/2022 recorded the utilization of the Ksh. 5,661,416,224,190.00 as shown in the table below:
Table 3.
A total of 3,944,715,377,630.00 were payments purportedly on domestic debts. The Appropriation Acts of 2014/2015 to 2021/2022 had not authorised incurring of domestic debts
That upon analysis of the Recurrent Appropriation Acts for 2014/2015 to 2021/2022, the report established that Ksh. 5,661,416,224,190.00 were spent on public debt repayment and public debts interest, whereby, Ksh. 3,944,715,377,630.00 was utilised in domestic debts and 1,716,700,846,560.00 in external debts. Payments were as follows: (PTO)
Graph 4
823,167,036,533.00
2,546,576,141,101.00
1,833,121,856,768.00 2,111,593,520,862.00 3,944,715,377,630.00
external debt repayments 1,716,700,846,560.00 Total repayments 5,661,416,224,190.00
Graph 5
What are the key findings of this debt Fraud investigation report?
1. There is no outstanding public debts. Therefore, the figure Ksh. 8,470,377,843,000.00 publicised by CBK as outstanding debt is fictitious.
2. A concealed fraud/heist of Ksh. 9,724,549,801,230.00 (8,470,377,843,000.00 + 1,254,171,958,230.00) through public debt. This is consistent with Parliament fraudulently raising public debt to Ksh 10trillion
3. Public debt turned into a Ponzi scheme to steal tax revenue
4. Unconstitutional amendment of the Constitution (Articles 206(1)) by illegally amending public finance management Act, 2012 Section 50(7) to facilitate and enable the fraud
5. Domestic debt is borrowed without authority and appropriation by parliament and that was no projects linked to the debt
6. There is no debt to be paid contrary to CBK publicised debt figures.