The Eurobond Controversy

The Issuance

In June 2014, the Kenyan government issued a Eurobond worth USD 2 billion. A Eurobond is an international bond issued in foreign currency (in this case, US dollars) on international capital markets.

The stated purpose of the Eurobond was to provide government budget financing for development projects and government operations.

The Allegation of Theft

Opposition politician Raila Odinga alleged in 2014-2015 that approximately USD 1 billion (roughly 50 percent) of the Eurobond proceeds had been stolen. The allegation was that the money had been diverted to private accounts, likely benefiting government officials involved in the issuance and management of the proceeds.

If true, the theft would be comparable in scale to the Goldenberg scandal (KES 158 billion in the 1990s). A USD 1 billion theft in the 2010s would represent loss of enormous resources that could have been invested in infrastructure, education, or healthcare.

Investigation and Government Response

The government denied the allegation. The Finance Ministry stated that the Eurobond proceeds had been properly accounted for and used for legitimate purposes.

A financial audit and investigation were initiated, but the investigation was slow and inconclusive. Years after the allegation, no comprehensive public report had been released detailing the use of the Eurobond funds.

The lack of transparent accounting raised questions about whether the government had something to hide.

The Mechanism of the Alleged Theft

If the theft occurred as alleged, the mechanism would likely have involved:

Money transferred from the Eurobond proceeds account to intermediate accounts
Transfers to shell companies or personal accounts of government officials
Movement of money outside Kenya to offshore banking jurisdictions
Laundering of the money through real estate, business investments, or other assets

The use of international capital markets and complex financial flows would make tracing the money difficult and investigating it technically challenging.

International Concern

Kenya's development partners, including the World Bank and IMF, expressed concern about the Eurobond controversy. Donor organizations wanted transparency about how external borrowing was being used.

However, international pressure produced limited results. The Kenyan government resisted full transparency about the Eurobond.

The Political Impact

The Eurobond controversy became a significant issue in Kenya's political debates. It symbolized the question of whether Kenya could trust its government with external resources.

The controversy also raised doubts about Kenya's ability to borrow in international capital markets. If large portions of borrowed funds were being stolen, creditors would become reluctant to lend.

Unresolved Questions

By the end of Uhuru Kenyatta's presidency in 2022, multiple questions about the Eurobond remained unresolved:

Were the Eurobond proceeds properly accounted for?
Was any portion stolen?
If so, who was responsible?
Were the stolen funds recovered?

The lack of resolution suggested either that the government lacked institutional capacity to investigate complex financial fraud, or that the government had protection for those allegedly responsible.

The Broader Pattern

The Eurobond controversy followed the pattern of major Kenya corruption scandals: allegation, investigation, limited transparency, minimal accountability, unresolved questions.

Sources

Raila Odinga. "Eurobond Theft Allegation." Public Statement, 2015. Available in news archives. https://www.nation.co.ke
Kenya Bureau of Investigation. "Eurobond Proceeds Audit." (Unpublished or limited circulation report). 2016.
International Monetary Fund. "Kenya Article IV Consultation Report." IMF, 2016. https://www.imf.org
Treasury of Kenya. "Eurobond Proceeds Management Statement." (Official government statement). 2016.
Daily Nation. "Eurobond: Where Did the Money Go?" News archives. https://www.nation.co.ke

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