Loans acquired by the government of the former president Juvenal Habyarimana are still reflected in the accounts of the current government – a situation the Auditor General reports that is leading to accumulation of those debts and may also result into government paying the wrong creditors.
In his latest report, the AG Obadia Biraro says the debts are on the ministry of finance books but there are no proper support documents which give details about those loans.
With such crucial documents missing, government may be safe now, but not forever. In the years to come, these loans could come back to haunt the government of the time. The Rwandan government may not have documents on its side, but the creditors or their associates have their contracts they signed for the loans.
Besides, as the Auditor General seems to suggest, some unscrupulous creditor may emerge. Worse still, government bureaucrats may collude with other people to pay out this money among themselves, hoping that no one ever comes to claim the debt.
“It is difficult to ascertain the accuracy of the balance reported as a liability and payments may be made to inappropriate creditors, [thereby] incurring unnecessary expenditure by the Government,” writes Biraro in the voluminous report obtained by The Chronicles.
Data shows that as of June 30, 2020, the Rwandan government had pending loan from the Habyarimana era totaling Rwf 27,365,921,353. The different loans have been accumulating interest going back from as far as 1975.
For example, there is loan which Habyarimana raised from issue of Treasury Bonds to SODEPARAL, which was making leather products, amounting to Rwf 17,016,390 on July 13, 1988. This debt has been dormant since 1988 and no accrued interest is recognized on this old debt.
There is a loan of National Post Office raised in 1993 as Rwf 346,400,166 as per amortization schedule and had accumulated to Rwf 1,403,994,590 as of June 30, 2020 due to the interests charged, but not paid. The interest will continue growing until government acts.
We also have the Libya loan, which was an agreement between the Government of Rwanda and the
Government of the Republic of Libya signed on 12th March 1975 for constructing Hotel MERIDIEN (currently the troubled Marasa Umubano Hotel in Kacyiru) with a loan amount of 900,000 Libyan Dinar (LYD) at 2.5% interest rate per annum that would be reimbursed in 25 years. The dormant unpaid balance is LYD 439,499.96 and no interest is recognized but the exchange difference in local currency increases the loan.
As of June 30, last year, this Libyan loan had a closing balance of Rwf 292,610,373 appearing in the Rwandan books of accounts. This money must be paid back to Libya.
Apart from the above examples highlighted by the Auditor General, there are also other old arrears from Pre-1994 period, with a long outstanding debt of Rwf 25,652,300,000 relating to arrears of the old financial obligations from before 1994. This is how the finance ministry characterizes these arrears.
The Auditor General however says it is a block figure not supported by any detailed list of creditors, agreements and debt amortization schedules.
In his recommendation to government, the AG writes: “Management should ensure that debts disclosed in the governments consolidated financial statements are supported by all necessary verifiable documents. For long outstanding dormant debt, the Ministry should consider writing them off and keep a memorandum that can be dealt with, case by a case basis. This relates mostly to the Old arrears (pre 1994) debt.”
The finance ministry in its response to the Auditor General ignored commenting on the Rwf 25b plus total block debt from the Habyarimana era.
A government response printed in the AG’s report reads: “For Libya debt, we have started exchanging correspondences through emails but still waiting their feedback for some documents we have requested for. The liquidation process of SODEPARAL has never been closed. However, there are ongoing discussions to find a mutual solution to close the liquidation process. The outstanding Issue regarding National Post Office debt is still under discussions with identification of a solution to address the problem permanently.”