The Auditor-General of Kenya, Nancy Gathungu has delivered a blistering verdict: some KSh 300 billion in funds raised through domestic bonds have simply vanished from accountability. With the public’s confidence eroding and the debt burden ballooning, Gathungu is now calling for urgent amendments to the Public Finance Management Act 2012 (PFMA) to plug the gaping holes in Kenya’s public-finance system.
Between July 2018 and June 2023, Kenya raised KSh 2.97 trillion via domestic treasury bonds. Of this, KSh 2.67 trillion was routed into the Consolidated Fund Services account. But the auditor’s report flags a startling gap: KSh 300 billion of these bond proceeds were not deposited in the Consolidated Fund and could not be traced to any specific projects, expenditures or even given uses.
Gathungu writes that the funds were mixed with other cash inflows (taxes, exchequer releases) making it impossible to verify what they were spent on. With no ring-fencing of bond proceeds for infrastructure or specified development projects, the audit warns of weakening investor confidence and blatant disregard for fiscal discipline.
1. Debt without development. The PFMA of 2012 mandates that government borrowings must primarily finance development expenditures, not merely plug holes in recurrent spending. Yet the report shows that the bulk of the borrowing flowed into debt repayment and exchequer releases rather than new infrastructure or growth-generating ventures.
2. Accountability vacuum. The missing KSh 300 billion underscores a worrying pattern: audits flag irregularities, pages turn, but there is little follow-through. Gathungu says this “circle of audit-outrage-zero accountability” needs to end. Indeed she is now demanding that the PFMA be amended to introduce sanctions for non-implementation of audit recommendations.
3. Risk to investor trust & debt sustainability. With domestic debt now representing a large share of Kenya’s total debt load — and borrowing used in ways inconsistent with legislative requirements — the country’s creditworthiness and capacity to sustain its obligations face real threat.
A revision of the PFMA 2012 to include enforceable penalties for officials who ignore or fail to implement audit findings.
A mandatory requirement that bond proceeds be ring-fenced to specific projects, with clear disclosures and tracking mechanisms so that their use can be audited.
A “clean up” of how the National Treasury handles domestic borrowing: the audit observation is that the Treasury floated bonds without matching them to defined, substantive development projects — a direct violation of the spirit of the PFMA.
Parliament may now face pressure to swiftly table amendments to the PFMA, to restore credibility.
Public criticism may mount over the culture of “audit findings → no action,” especially as citizens see little visible return on the billions borrowed.
Global markets and credit-rating agencies may take note: failure to transparently account for such large-scale borrowing could increase Kenya’s borrowing costs and reduce appetite for its securities.
Officials responsible for the mis-management of these bond proceeds may face political or legal risk if the amendment and follow-through gains traction.
Senior Counsel Paul Muite has said Gathungu’s use of the phrase “financial paper trail cannot be traced” is just a polite way of saying the money was stolen.
Auditor-General Nancy Gathungu has sounded the alarm: this isn’t just about missing billions — it’s about a broken system that allows massive borrowing, opaque spending and virtually no accountability. The KSh 300 billion unaccounted for is the smoking gun. The question now is whether Kenya’s governance framework will be reformed before further damage is done. With the PFMA under revision, legislators and watchdogs have their moment of truth.
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