IMF immunity claim challenged in Uhuru, Ruto's odious debt case

Busia Senator Okiya Omtatah insists that the International Monetary Fund (IMF) cannot run away from Sh13 trillion allegedly borrowed by Kenya, and which is at the heart of a court case questioning how the money was spent.

Omtata argues that the immunity granted to the global lender does not extend to an illegality or a crime committed on Kenyan soil.

“The immunity clause does not extend to unconstitutional conduct. Comparative constitutional reasoning supports the supremacy of the constitution over treaties,” he says in court papers.

In this case, the IMF has waved the immunity card in court, saying 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 illegally borrowing Sh13 trillion, which it cannot allegedly account for, the international financial institution said it is immune from judicial proceedings.

It claimed Kenya is bound to a 1963 agreement that it cannot be sued on Kenyan soil and its assets cannot be touched.

“Upon enactment of the Bretton Woods Agreements Act on December 10, 1963, Kenya accepted the Articles of Agreement of the International Monetary Fund (fund agreement) and the Articles of Agreement of the International Bank for Reconstruction and Development (Bank Agreement),” said IMF lawyer Lawson Ondieki.

Statutory mandate

Central Bank Governor Kamau Thugge distanced the institution from the loans, 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 Sh1 trillion.

“I confirm that the JPMorgan 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.

Borrowing spree

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

National Assembly Clerk Samuel Njoroge argued that the case had ignored accountability channels provided by the law. 

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

In this case, the petitioners claimed 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 President William Ruto and his predecessor 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 Uhuru should be forced to refund Sh4.6 trillion to the National Treasury and Ruto 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 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 Uhuru, 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 Sh2.3 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 Sh6.208 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, 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 borrowed Sh2.2 million over and above the Sh884 million allowed by the Appropriation Act 2022, 2023 and 2024. 

In addition, court documents read that Kenya Kwanza also took a Sh50 million ‘on lent loan’ from the 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 the loans were not included in the national budget for accountability.

“The odious debts, including the Eurobonds, amounting to Sh6,950,163,132,328 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 argue that Kenyans should 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.