Auditor General has warned of a probable lawsuit following the Government’s failure to service about Sh5.1 billion in loans.
The National Treasury failed to repay an international commercial bank for loans made for the construction of three disputed dams with the police currently investigating the Itare, Kimwarer and Arror dams.
For the construction of the Itare Dam, Sh3.1 billion is for the loan used while Sh1.26 billion is for the Kimwarer Dam and Sh790 million is for the Arror Dam.
According to the audit of the National Treasury’s CFS-Public Debt Expenditure account for the fiscal year ending June 30, 2021, Kenya received Sh37.4 billion (305,283,626 euros).
As per Nancy Gathungu’s report, the country has defaulted on the loans by Sh3 billion on the principal and Sh1.8 billion on the interest.
The credit agreements for the loans were not supplied for audit scrutiny to confirm the terms of the loans, according to Gathungu.
The auditor also inquired if the credit termination was carried out in compliance with the terms of the respective agreements.
“The default on debt repayment exposes the government to risks of legal suits that may lead to punitive penalties and subsequent loss of public resources,” Gathungu said.
The unpaid payments were discovered through a check of the Commonwealth Secretariat Debt Recording and Management System by the National Treasury as of June 30, 2021.
Treasury informed auditors that the remaining sum had been cancelled by the lender, Intesa Sanpaolo, an Italian bank.
The loan agreements for the three dams, according to the ministry, are in the hands of the Directorate of Criminal Investigations until the case is in court.
CMC Di Ravenna Societa Cooperativa, Itinera S.P.A, and CMC Di Ravenna- Itinera were to work together on the contracts.
Last year, the three companies at the centre of the controversy filed a lawsuit against Kenya in the International Court of Arbitration, claiming Sh11 billion in compensation for the projects’ cancellation.
The facts bring to light a long history of controversy around mega-dam construction.
Several breaches were also discovered during an audit of the Northern Corridor Development Department, the state agency in charge of overseeing the project.
At least Sh3.7 billion from the Italian bank could have been looted through personal accounts, according to an analysis of KVDA books as of June 30, 2020.
Gathungu revealed that the money was never wired to the Kerio Valley Development Authority’s banks.
The money, according to department records, was disbursed to KVDA, the state body in charge of paying contractors and implementing the project.
Former Treasury CS Henry Rotich is battling to clear his reputation in court after being ousted from his position as state purse holder due to allegations of corruption.
In connection with the dams’ saga, he and others have been charged with commercial crimes as well as improper procurement.
The money borrowed from the Italian bank was used to make irregular advance payments to the contractor in July 2018, according to the auditor.
In September 2018, another Sh4.5 billion was given out for the Arror Dam project, but neither of them has been completed.
Taxpayers contributed Sh12 billion to secure finance for the two dams in order to meet the loan conditions from Italy.
If the delayed payments are not resolved, taxpayers could lose up to Sh18 billion in the project, which is currently surrounded by shrubbery.
The Kimwarer Dam, worth Sh22.2 billion and the Arror Dam at Sh28 billion, were both found to be outrageously overpriced.
The Kimwarer Dam project was cancelled by President Uhuru Kenyatta, who overruled a technical team that had been looking into its viability.