Debt justice for taxpayers long overdue


In cases of debt distress, preference has been how to save creditors. PHOTO | SHUTTERSTOCK

I have been reading up on the subject of debt justice and the whole concept of odious debt and how odiousness has been invoked by newly elected government regimes to repudiate obligations contracted by outgoing corrupt.

The most fascinating case for me was the episode in Mozambique where a constitutional court declared null and void loans worth $1.4 billion that triggered the country’s worst financial crisis.

I have been encouraging local debt campaigners and civil society entities to test our courts on this subject matter by bringing up some blatant and callous where the taxpayer has been forced to keep servicing expensive debts that did not benefit the citizen.

In 2014, the government borrowed a massive $ 71 million loan (Sh 8.3 billion) from Bank Leumi of Israel to fund the Galana Kulalu project.

Despite the Israeli contractor, Green Avara, abandoning the project in 2019 after being paid Sh 5.9 billion, the taxpayer will still pay the expensive dollar loan to the Israeli bank until September 2033.

The Itare Dam project in Nakuru County stalled in 2018. Yet, according to the data in the external debt register published on the website of the Treasury, we have a massive euros 141 million ( Sh22.4 billion) debt from Intessa Paolo Bank, which the taxpayer must service until September 10, 2034.

Then is the case of the infamous Arror and Kimwarer dams. The original loans, according to the data published on the external debt register were a loan of Euros 258. 6 million (Sh41 billion) for Kimwarer and Euro 319.6 million (Sh50,9 billion for Arror dams. It was a syndicated loan where the lender on record was the Italian entity, Intessa Paolo.

When the scandal broke out, the government and the lenders quietly agreed to cancel the facility.

The new information on the external register is that we withdrew euros 91 million (Sh14 billion) in the name of Arror and euros 71 million (Sh11 billion) for Kimwarer. This begs the question of what is an odious debt if this is not. How did the taxpayer benefit from this loan? According to the report of the Auditor-General, we have defaulted on all three debts owed to Intessa Paola, including the Itare dam facility

In a clever tactical manoeuvre, the Italians have lodged big claims against Kenya at the t International Court arbitration. The taxpayer may face double jeopardy if the Italian contractors win the arbitration case. And President William Ruto has said he is committed to reviving the project.

In the interest of debt justice and just like the Mozambicans did, some publicly spirited litigation entities should go to courts by invoking the question of benefit to the taxpayer and the broader question of tax justice.

Without court intervention, the next thing we will see are pending bills and big court and arbitration awards to the wily contractors. Legality is not the same thing as legitimacy. The basic question we should be asking ourselves repeatedly is this; where are the dams? How have the loans benefited ordinary men and women in Kenya?

We need to test all the cases where the taxpayer has paid billions for thin air.

I know of a case of a Chinese contractor who received billions as part of advance payments in a contract to build electricity transmission lines in northern Kenya. Because the government could not raise the second part of the advance payments, the project stalled. It is no longer a priority in the plans by the government. Today, there are many cases like this.

One of the most expensive projects for the taxpayer in the energy sector was the project to build the transmission power line connected to Lake Turkana Wind Power (LWTP)to the national grid.

The government signed an agreement with LWTP that in the case it completed its plant before the transmission line is completed thus rendering it impossible to evacuate power to the national grid, the government would compensate it for the duration.

That the government did not think about insurance remains a puzzle. As it turned out, the government paid a whopping Sh 18 billion in so-called deemed generation charges from the period between 2013 and 2019.

Although perfectly legal, the taxpayer paid for thin air. In August 2017, the Spanish contractor building the line was declared bankrupt in Spain, forcing the government to terminate the contract after paying the Spanish company Sh10 billion.

The Chinese contractor was brought in to complete the project. Messr’s Nari Group was contracted at another Sh 9 billion. The puzzling thing is that on the external debt register, we still have an expensive euros 55 million debt that the taxpayer must service until October 2050. The need of the hour is debt justice to the taxpayer.

The writer is a former managing editor of The EastAfrican.

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