Why Kenya will pay 'odious' debt after all

Kenyan taxpayers have little choice but to repay the country’s Sh11.5 trillion debt, as long as it was legally contracted by the National Treasury and ratified by Parliament.

This is according to political economist and former Mandera Senator Billow Kerrow, who has warned against defaulting on legally obtained foreign loans, even if mismanaged.

“If the loans were properly executed by the Treasury, which has the powers under the Public Finance Management (PFM) Act and the constitution, and the same was submitted to Parliament and ratified, then it becomes very difficult to challenge their legality,” said Kerrow on Spice FM on Wednesday.

The political economist said that the 349 members of the National Assembly have the power to check government borrowing, but have largely failed to do so, often succumbing to pressure from the Executive.

Busia Senator Okiya Omtatah and businessman Jimi Wanjigi are among those who have challenged the legality of some of Kenya’s debts.

In April, Omtatah and eight other petitioners moved to the High Court seeking a freeze on further borrowing. They alleged that some loans secured by President William Ruto and former President Uhuru Kenyatta were unconstitutional and risk plunging the country deeper into crisis.

While many Kenyans have called for debt renegotiation and accountability from officials, Kerrow cautioned against defaulting, warning of serious economic fallout.

“If you default on a sovereign loan like those from China, the International Monetary Fund (IMF), and the World Bank, the consequences will be very severe for the country. You won’t be able to access loans anywhere, global payment transactions will be impacted, and affect foreign investment ratings,” he noted.

Kerrow also expressed skepticism about cancelling flawed contracts, warning that doing so could trigger lawsuits and costly settlements.

The government has recently pushed the Kenya Revenue Authority to meet higher revenue targets and is increasingly turning to securitisation of levies, such as the Road Maintenance Levy, as collateral for new loans.

“It’s not the first time securitisation is happening…The concept is that you can use anything that the lender is willing to accept to securitise. SGR, for instance, was securitised against its future revenues,” Kerrow stated.

“When the government finds an opportunity to get some revenue, it won’t stop at anything,” he added.

He urged the government to adopt more prudent fiscal management, including dedicating at least 30 percent of the national budget to development, something he said is currently lacking.