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Story by MWALIMU MATI

During a meeting at the Treasury called by the permanent secretary for Finance, Mr Joseph Kinyua, last week to discuss public concerns about the Anglo Leasing, representatives of civil society requested to see the Anglo Leasing irrevocable promissory notes that Finance minister Amos Kimunya recently brandished at a press conference.

They could not have been more stunned when Mr Kinyua told them that the irrevocable promissory notes which the Minister for Finance refused to table in Parliament are actually in the custody of the Kenya Anti-Corruption Commission. The line from Treasury is that KACC is still investigating the notes and they are evidence which must be kept safe.

This begs the question, why did Mr Kimunya tell a press conference and Parliament that the notes are kept in a safe at Treasury? Justice Ringera has never stated before that he has been in possession of the promissory notes — indeed they have never featured in any of his public statements on Anglo Leasing.

This queer revelation raises questions, among sceptics such as who should Kenyans believe — the Minister for Finance or his accounting officer, the Permanent Secretary for Finance? But more seriously, it shines the spotlight on the role of the Treasury in grand corruption and how it has in successive scandals avoided accountability to other institutions and acted in an opaque manner.

One problem Kenya has to urgently deal with is that Treasury is not accountable to Parliament and kept the contracting of the bogus loans, underpinning the Anglo Leasing scandal, shielded from legislative scrutiny in breach of the External Loans and Credits Act which requires Parliament to be informed of such debt by the Minister of Finance. To date, for example, the detailed separate audits of the 18 security-related contracts known as Anglo Leasing worth Sh56.33 billion, have never been tabled in Parliament. But it is not just Parliament that has been kept in the dark. The Central Bank of Kenya (CBK) has been side-stepped by the Treasury for decades as it borrows recklessly, especially since the mid 1980s.

During the Goldenberg Commission of Inquiry, it became clear that tens of billions of shillings were spirited out of the country as a result of Kamlesh Pattni’s various export compensation and foreign exchange trading schemes in the early 1990s. Concerned that institutional loopholes might still exist in 2004, the Commission of Inquiry requested the then CBK Governor, Dr Andrew Mullei, to provide information about the CBK’s procedures in handling public money.

The May 11, 2004 letter is illuminating in its comments on foreign payments and the National Debt Office. As of that date the CBK was processing over $550 million (Sh43 billion) annually in external payments on behalf of the Government “with a large proportion being debt service payments.”

Section 31 of the Central Bank of Kenya Act states that the CBK “shall administer any payment agreements entered into by Kenya, and the Bank shall be consulted by the Government in negotiating any payments agreement.”

Nevertheless in practice, the CBK has been kept out of the loop. Indeed in 2004, the CBK was lobbying for amendments to the External Loans and Credit Act to “compel the Government to consult the CBK in all external loans borrowing.” The amendment has never been enacted.

So, the situation in 2007 remains as it was in 2004. Although Mr Kinyua has said that he issued a circular abolishing the use of promissory notes and to stop commercial credit agreements of the Anglo Leasing type, the Government does not have to consult with the CBK before it borrows money abroad.

In fact, the Government is not obliged to give full disclosure of external payment agreements it requires the CBK to administer. As regards external commercial public debt, the Central Bank is legally bound to pay without protest “so long as the instructions given to the Bank by the Government are proper and there are sufficient funds to honour the transaction without querying the underlying transactions.” This is what happened during the entire Anglo Leasing series of payments of commitment fees, principal repayments and interest servicing from 1997 to date.

Even more frightening is the admission by the PS and other senior Treasury officials to civil society representatives that there are false entries in the country’s national external debt register. These were apparently inserted between 2001 and 2004 and cover the Anglo Leasing-type contracts.

It would appear that despite having cleaned the external public debt register in 2001, after hiring Lazard Brothers the Government has in just four years loaded the external public debt register (and citizens) with close to $1 billion worth of fictitious credit and debts.

Unfortunately, these debts are secured by irrevocable promissory notes and binding contracts, that make it extremely difficult for the Government to avoid making payments to what it has called ghosts. Even though the Controller and Auditor General found that not a shilling in credit was ever provided by these ghosts to justify issuing promissory notes.

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Mr Mati is a director of the Mars Group, an anti-corruption lobby.