Beyond the Ledger: Litigating Odious Debt in Kenya’s Constitutional Order

The High Court of Kenya is currently seized of a petition that could dramatically redefine the contours of fiscal accountability and sovereign debt jurisprudence in the region. Petition No 531 of 2015 is hinged on the doctrine of odious debt—a principle that, while historically rooted in international law, is being tested against Kenya’s constitutional and statutory frameworks. This petition, advanced by a consortium of public interest litigants led by Okiya Omtatah, targets not only the legitimacy of public borrowing but also the personal liability of high-ranking officials, past and present.

Understanding the Doctrine of Odious Debt

The doctrine of odious debt holds that debts incurred by a government without the consent of its people, and not for the public good, should not be enforceable against the state. In this classical doctrine, three elements must align: absence of public consent, absence of public benefit, and creditor awareness of both. While typically invoked in post-dictatorship or regime change contexts, the current petition domestically roots these principles within the structures of the 2010 Constitution and the Public Finance Management Act, 2012 (PFMA).

Article 220(1) of the Constitution, read with Sections 15 and 50 of the PFMA, imposes clear procedural and substantive obligations on government borrowing: loans must be approved by Parliament, tied to development expenditure, and disclosed in the national budget. The failure to observe these thresholds, the petitioners argue, renders several tranches of Kenya’s national debt—amounting to over Kshs13 trillion—not merely imprudent, but outright unconstitutional.

The Crux of the Legal Challenge

The petition crystallizes around one central question: Can loans incurred outside the budgetary framework, for purposes not approved by the legislature, be binding on the Republic?

The petitioners answer in the negative, arguing that such debts are not “public debts” within the meaning of Article 214 of the Constitution. They further allege that the Executive has over a ten-year period borrowed approximately Kshs6.95 trillion in violation of parliamentary authorization, and that this sum includes funds used for debt servicing itself—contrary to the PFMA’s express prohibition against borrowing for recurrent expenditure.

Perhaps more strikingly, the petition goes beyond abstract principles to point fingers—explicitly naming both former and current presidents as having presided over, and in some instances directly sanctioned, unlawful borrowing. The case also levels allegations against constitutional commissions and independent offices such as the Controller of Budget and the Auditor-General for their failure to forestall or interrogate these fiscal irregularities.

Implications for Lenders and Oversight Institutions

The ripple effects of this petition may extend beyond Kenya’s borders. By asserting that international lenders such as the IMF had actual or constructive knowledge of the illegalities underlying certain loans, the petition seeks to pierce the traditional immunity of such institutions. Should the High Court endorse this line of reasoning, it would potentially expose lenders to civil liability and invalidate contractual obligations tied to sovereign loans—an outcome likely to reverberate across global debt markets.

Domestically, the petition challenges the constitutionality of amendments to the PFMA which allow for sovereign bond proceeds to be held offshore and for debt ceilings to be pegged to GDP without Senate participation. These provisions, the petitioners argue, have been weaponized to erode parliamentary oversight and facilitate fiscal opacity.

Legal and Policy Questions Arising

The case compels serious reflection on several pressing questions. First, what are the contours of executive discretion in fiscal matters in a devolved constitutional order? Second, can Parliament’s failure to act be judicially sanctioned in a way that discharges citizens from debt obligations? And third, what remedies—if any—exist against sitting or former heads of state for unconstitutional fiscal conduct?

In addition, the finding that over Kshs 2.3 trillion may have been overpaid—and that certain loan amounts were misrepresented as development spending—raises the possibility of legal claims to recover those funds from individuals, not just the government. This shift toward personal accountability for public debt signals a potential turning point in how fiscal responsibility is enforced. It suggests that legal advisors, oversight institutions, and government officials may increasingly be held personally liable for debt incurred outside the limits of constitutional authority.

Domestic Borrowing and Risk Exposure For Investors

While much of the discourse around odious debt tends to focus on external sovereign loans, the petition also raises questions touching on Kenya’s domestic borrowing landscape, particularly regarding government securities held by local banks, pension funds, insurance companies, and individual investors.

As noted earlier, the Public Finance Management Act and the Constitution, require public borrowing—whether external or internal—be tied to development expenditure and authorized by Parliament. Where government bonds (other than infrastructure bonds) have been issued without linkage to any specific development project or without Parliamentary approval through Appropriation Acts, they too may be classified as odious within the legal framework outlined by the petitioners.

This classification carries material risk exposure for local financial institutions and investors who have traditionally considered government securities as “risk-free.” Should the Court affirm that debts incurred outside the law are non-binding on the Kenyan public, there could be legal uncertainty around the enforceability or repayment priority of these instruments. Put briefly, this raises:

• Credit risk: Banks and pension funds may be exposed to the risk that certain bond obligations could be invalidated or subordinated in the event of sovereign restructuring linked to odious debt findings.
• Reputational risk: Financial institutions that heavily invested in questionable securities could face scrutiny from shareholders, regulators, and the public.

It is important to note that infrastructure bonds, which are typically tied to specific projects and transparently appropriated, are less vulnerable to this risk. Their project-specific nature and alignment with constitutional requirements make them relatively insulated from the odious debt claims now before the Court.

Thus, while external borrowing has traditionally been the primary concern in odious debt jurisprudence, the arguments advanced in this petition invite a broader constitutional interrogation of domestic public debt as well, potentially redefining the “risk-free” assumptions underpinning Kenya’s financial sector.

Conclusion

This petition marks a critical inflection point in the evolution of Kenya’s jurisprudence on constitutional law. By challenging the legal foundations of public borrowing and calling for personal accountability among state officials and institutions, the case invites the judiciary to confront long-standing tensions between executive discretion and constitutional oversight. A ruling in favor of the petitioners could set a transformative precedent—not only by clarifying the legal status of odious debt under domestic law, but by affirming that fiscal governance must be rooted in transparency, legality, and public consent. As Kenya navigates its future economic path, the outcome of this litigation may very well define the rules of engagement for generations to come.

Should you have any questions on this legal alert, please do not hesitate to contact Ivia Kitonga at mail@kitllp.com.

This article does not constitute legal advice and is for informational purposes only. Parties involved in constitutional matters are encouraged to seek professional legal counsel tailored to their specific circumstances.