Why IMF is seeking immunity, removal from Sh13 trillion loan case

The International Monetary Fund (IMF) has waved the immunity card to court, saying that it cannot be asked to answer questions over loans it issues.

In its application to have its name struck out of a case where the government is accused of borrowing Sh13 trillion, which it cannot allegedly account for, the international financial institution said that it is immune from judicial proceedings.

“ We will make an application for the 22nd respondent to be struck out from this application,” argued IMF lawyer Lawson Ondieki.

In reply, Busia Senator Okiya Omtatah told High Court judges Francis Gikonyo, Roselyn Aburili and Moses Ado that the money at the heart of the case was loaned by the IMF.

“In as much they enjoy immunity, they do not enjoy immunity,” argued Omtatah.

Central Bank Governor Kamau Thugge distanced the institution from the loan, saying that although it is the designated government’s bank, it is not responsible for fiscal policy or management of foreign debt.

According to the governor, CBK only implements decisions lawfully made by the National Treasury.

“In the present instance, CBK acted strictly within its statutory mandate as fiscal agent and banker to the government, and, in that capacity, discharged its statutory functions. I  am advised by the 19th respondent advocates on record, which advice I verily believe to be true, that the petition is fatally defective as it offends the doctrine of exhaustion of constitutional and statutory remedies,” replied CBK.

At the same time, CBK explained that in 2014, it opened an offshore account at JPMorgan Chase New York Bank to receive Eurobond money.

It explained that the money was used to offset syndicated loans, paid bank charges, and the remainder was wired to the exchequer account. The amount was close to Sh 1 trillion.

“I confirm that the JP Morgan Chase account was opened for the special purpose of receiving and processing the proceeds of the Eurobond in accordance with the lawful instructions of the National Treasury. The account was closed once the proceeds had been fully received, applied, and accounted for,” said CBK director in charge of the financial markets department, David Luusa.

He argued that the formula through which Omtatah, and activists Nyakina Gisebe and Bernard Muchiri, Kenyan-based in the United Kingdom, Karanja Matindi, and Nakuru-based surgeon Magare Gikenyi claim that Sh13 trillion cannot be accounted for is flawed.

On the other hand, National Assembly Clerk, Samuel Njoroge, argued that the case had allegedly ignored accountability channels provided by the law.

In his response, he said that the odious debt principle raised in court does not apply to Kenya or internationally.

“Consequently, the very subject matter of the petition, legality and propriety of Kenya’s debt portfolio is presently under active consideration by the very constitutional organs expressly mandated to interrogate and pronounce themselves on such matters, namely Parliament and the Office of the Auditor-General,” he said.

In this case, the group led by Omtatah claimed that the government borrowed Sh13 trillion, which it cannot account for, nor was the money used to benefit Kenyans or approved by Parliament.

This startling allegation that both President William Ruto and Uhuru Kenyatta went on a borrowing spree and that the money ended up in a dark, bottomless hole is contained in a case filed before High Court Judges John Chigiti, Roselyn Aburili, and Lawrence Mugambi.

The petitioners tabulated in a 166-page court document how much the two presidents sought from foreign partners and Eurobond and how much the country has spent.

They concluded that President Uhuru should be forced to refund Sh 4.6 trillion to the National Treasury and his successor Sh2.5 trillion.

The five petitioners explained that Uhuru is responsible for the Sh4.5 trillion his administration allegedly borrowed as odious debt from 2014 to 2022. At the same time, they argued that Dr. Ruto should equally bear the responsibility for the Sh2.2 trillion borrowed under his watch from 2022 to 2025.

“Petitioners reiterate that these debts were both unconstitutional and unlawful and, therefore, odious because the respondents borrowed the loans, yet they were not in the Appropriation Acts (the national budgets) of the respective financial years approved by Parliament and signed into law by the President, and they were not tied to any public development projects,” court papers read in part.

Those sued include former and current government officials.

They include former President Uhuru, President Ruto, Treasury Cabinet Secretary, his Principal Secretary, Director General of the Public Debt Management office, Attorney General, Controller of Budget Margaret Nyakang’o, National Assembly, former Controller of Budget Agnes Odhiambo, and former Auditor General Edward Ouko.

Others are former Treasury Cabinet Secretaries Henry Rotich, Njuguna Ndung’u, and Ukur Yatani, Auditor General Nancy Gathungu, Central Bank Governor Kamau Thuge, the Ethics and Anti-Corruption Commission (EACC), and the International Monetary Fund (IMF).

They also included the Senate as an interested party.

In addition, they claimed that during Uhuru’s tenure, his administration raised public debt from around Sh 2.3 trillion. According to the group led by Okiya, it took Kenya 50 years to accrue the amount.

Court documents also read that the debt accumulation had, by June 30, 2022, hit Sh 6.208 trillion in eight years, contrary to the Constitution.

Omtatah, Gisebe, Muchiri, Matindi and Magare also apportioned blame on Ruto, who was then Uhuru’s deputy.

According to them, he, too, allegedly engaged in an illegal borrowing spree. They alleged that he first borrowed Sh208 million to buy back the Eurobond notes in June 2024. They argued that this had already been sorted as a direct charge and consolidated fund.

They also claimed his administration further allegedly borrowed Sh2.2 million over and above the Sh 884 million allowed by the Appropriation Act 2022, 2023 and 2024.

In addition, court documents read that Kenya Kwanza also borrowed  Sh50 million ‘ on lent loan’ from the International Monetary Fund (IMF).

They explained that their grievance about the loans was that the two presidents borrowed without following the law, without the approval of Parliament and were not included in the national budget for accountability.

“ The odious debts, including the Eurobonds, amount to Kshs. 6,950,163,132,328 were unlawfully and unconstitutionally incurred by the Respondents in the period spanning the financial years 2014/2015 to 2024/2025(i.e., up to 30th November 2024),” court papers continue to read.

At the same time, they alleged that not all the money was tied to any development projects.

“There is no evidence that proceeds of these impugned loans were used for the common good. In particular, they were not used for any development projects as required by law,” the five petitioners said.

According to them, in most countries, individuals do not have to repay money that others fraudulently borrow in their name.

 Similarly, they said, a corporation is not liable for contracts that its chief executive officer enters into without the authority to bind the firm.

They are of the view that Kenyans should not pay for the money borrowed by the two Presidents. Instead, the two should pay from their pockets.

They are targeting escrow accounts allegedly opened in JPMorgan Chase and Citibank, arguing that the CBK governor illegally opened the accounts to bypass the Constitution.

For example, court documents read that from the 2014-2015 budget, there is an unexplained extra Sh710 million from the Eurobond.

The five argued that in that financial year alone, the budget was fully financed through taxes, loans and grants from other governments.

“Hence, there was absolutely no need for the entangling Kenyans into the Eurobond loan trap,” the court heard.

They accused the Treasury CS of allowing illegal borrowing, which they stated resulted in Kenya’s huge debt stock of Sh11.5 trillion, whose repayment averages around Sh1.7 trillion annually.

On the other hand, the Attorney General wants the case struck out. The government legal advisor argues that it took too long for the five to amend it.

“ The applicants have not discharged the burden of laying a cogent basis for the over 10 months’ inordinate delay in filing an Amended Petition as ordered by the Court on March 5, 2024, to the satisfaction of the court and the respondents,” AG’s lawyer Samwel Kaumba replied.