Economy

Kenya faces Sh3bn debt claim dating back to 1975

money

Delays in repaying the loan and interest rates have seen the bill rise to over Sh3 billion. Photo/FILE

Taxpayers risk settling a Sh3 billion debt signed by the Jomo Kenyatta government in 1975 should the Treasury pay two European firms linked to Anglo Leasing, a parliamentary watchdog committee has warned.

The Public Accounts Committee (PAC) said two banks — one Belgian and another Austrian—are seeking the cash for a loan they offered for construction of a fertliser plant that never took off 39 years ago.

Austrian bank—Bowaag—is demanding Sh974,728,657 while Ducroira from Belgium is seeking Sh2, 190, 577,803.

Committee chairman Ababu Namwamba said the country is likely to receive the compensation claims should Treasury go ahead to settle the Sh1.4 billion international arbitration court awards to First Mercantile Securities Corporation and Universal Satspace.

“Kenya may possibly be slapped with another claim for Sh3 billion allegedly owed to the Austrian bank and a Belgium enterprise on account of Kenren transactions,” Mr Namwamba said.

The government in 1975 entered into an agreement with international lenders to finance the construction of a fertiliser plant in Kenya.

Delays in repaying the loan and interest rates have seen the bill rise to over Sh3 billion.

The government had declined to repay the loan, citing fraud but the European banks moved to court and also sought the assistance of the Paris club to have Kenya settle the debt.

Two House committees endorsed the Treasury’s plan to pay First Mercantile Securities Corporation and Universal Satspace LLC the colossal amount arising from judgment that the two claimants got from Europe’s highest court of international disputes settlement.

But the Law Society of Kenya is in court to block the payments, which were due to be made by the end of April.