Central Bank of Kenya Aligns with Omtatah in Challenging Alleged Illegal Borrowing

The Central Bank of Kenya (CBK) has made a significant move by officially joining a constitutional petition challenging the legality of Kenya’s public debt. This legal action, spearheaded by civil rights activist and Senator Okiya Omtatah along with eight other petitioners, accuses past and present government officials of engaging in what is described as “odious debt”—borrowings undertaken in violation of constitutional provisions.

This landmark case could profoundly influence Kenya’s economic governance, transparency, and public accountability, potentially setting a precedent not only within Kenya but across the African continent.

The Petition: What Is at Stake?

The constitutional petition, filed as Petition No. E216 of 2025, targets various government officials, including former President Uhuru Kenyatta, as well as senior Treasury and budget officers. It alleges that several loans contracted over multiple administrations breach constitutional safeguards that govern public finance and borrowing.

Senator Okiya Omtatah, a prominent advocate for economic justice, described the CBK’s decision to back the petition as “a monumental step in the fight for justice, accountability, and economic liberation for Kenyans.” The petitioners argue that some of the loans should be declared illegitimate, if not outright void, due to procedural violations and lack of parliamentary approval.

Why Is the CBK Involved?

In a move that surprised many observers, the Central Bank of Kenya joined the case as the 19th respondent, acknowledging the “substantial public importance” of the matter. In its official court filing, CBK highlighted that the case raises complex constitutional questions, including the interpretation of key provisions such as:

• Article 206: Governing the management of public finances.
  
• Article 211: Regulating the issuance of public debt.
  
• Article 214: Requiring transparent reporting of financial activities.
  
• Article 228: Outlining accountability mechanisms within public finance.
  

CBK’s involvement reflects its recognition that Kenya’s debt portfolio impacts the country’s economic stability, future borrowing capacity, and the socio-economic rights of current and future generations.

Background: Kenya’s Growing Public Debt Concerns

Kenya’s public debt has ballooned in recent years, raising alarms among economists, civil society, and the international community. According to data from the World Bank, Kenya’s debt-to-GDP ratio has been steadily increasing, reaching levels that pose risks to fiscal sustainability.

The government has faced criticism for lack of transparency in loan approvals and the conditions attached to some of these borrowings. Concerns have also been raised about the servicing costs of debt potentially crowding out essential spending on healthcare, education, and infrastructure.

The debt issue is compounded by longstanding challenges such as corruption, inefficiencies in public procurement, and weak oversight institutions. Against this backdrop, calls for a comprehensive audit and judicial review of Kenya’s debt have intensified.

The Call for a Multi-Judge Bench: Why It Matters

The petitioners have requested the empanelment of a multi-judge bench under Article 165(4) of the Kenyan Constitution. This is a significant legal request because a multi-judge bench handles cases involving complex constitutional matters of national importance.

CBK echoed this request, emphasizing the need for impartial and authoritative jurisprudence to resolve the conflicting legal interpretations around Kenya’s public debt framework. A ruling from such a bench would carry considerable weight and set a binding precedent on the handling of public debt.

Public Finance and Constitutional Safeguards

Kenya’s Constitution provides a robust framework for public finance management intended to ensure transparency, accountability, and fiscal prudence. Some of the key provisions relevant to this case include:

• Article 209: Limits the amount of money the government can borrow and requires parliamentary approval for loans.
  
• Article 212: Mandates the use of public funds for purposes authorized by law.
  
• Article 229: Assigns the Auditor General the responsibility to audit public finances and report annually on public debt and other expenditures.
  

The petitioners argue that several loans were contracted without proper parliamentary oversight or in violation of these constitutional rules, rendering them unlawful.

The Role of the Auditor General and Debt Audits

Following growing public pressure, the Kenyan government announced a comprehensive audit of all public debt dating back to 1965. This audit is being conducted by the Auditor General and is meant to establish the legality and terms of all government borrowing over the decades.

However, Senator Omtatah has criticized this move as a political smokescreen designed to delay real accountability. He pointed out that Article 229(4)(g) of the Constitution already requires annual audits of public debt and timely public disclosure — requirements that the government has allegedly neglected.

Omtatah and others have therefore called for the judicial system to intervene to compel transparency and hold officials accountable.

Civil Society and Public Interest Groups Rally Behind the Petition

The case has attracted broad support from various public interest organizations, including:

• Law Society of Kenya (LSK)
  
• Transparency International Kenya
  
• Kenya Debt Abolition Network (KEDAN)
  

These groups emphasize that tackling illegal and unsustainable debt is critical to safeguarding Kenya’s economic future and protecting taxpayers from bearing the burden of unaccountable borrowing.

Transparency International Kenya’s director recently stated, “This petition represents a pivotal moment to restore faith in public finance management and to ensure that debt is contracted in line with the law and public interest.”

Potential Implications for Kenya’s Economic Future

If the court empanels a multi-judge bench and rules in favor of the petitioners, several outcomes could follow:

• Invalidation of Illegal Loans: Loans found to have been contracted unlawfully may be declared void, affecting Kenya’s total debt stock.
  
• Increased Accountability: Senior officials involved in unauthorized borrowing could face legal and political consequences.
  
• Policy Reforms: The ruling may spur reforms in how debt is contracted, managed, and disclosed, leading to stronger institutions.
  
• Impact on Credit Rating: While some fear a ruling could temporarily unsettle markets, many analysts believe clarifying Kenya’s debt framework would improve long-term fiscal credibility.
  

This case could also inspire other African nations grappling with public debt challenges to pursue similar legal scrutiny, advancing debt accountability continent-wide.

Kenya’s Debt Landscape: Current Status and Challenges

As of early 2025, Kenya’s total public debt is estimated at over KES 10 trillion (approximately USD 80 billion), with domestic and external debt components. The government continues to borrow to finance infrastructure projects, social programs, and budget deficits.

However, challenges remain:

• Debt Sustainability: Rising debt servicing costs crowd out social spending.
  
• Currency Risks: External debt denominated in foreign currencies exposes Kenya to exchange rate volatility.
  
• Corruption and Mismanagement: Past irregularities have reduced confidence among lenders and citizens alike.
  
• Economic Growth Pressure: Slower GDP growth constrains the country’s ability to service debt.

In this context, the constitutional petition and the CBK’s support highlight an urgent need to address Kenya’s debt challenges through transparent, accountable governance.

Reactions from Key Stakeholders

• Senator Okiya Omtatah: “The fight against odious debt is not just about numbers; it’s about protecting Kenyans’ futures and restoring trust in our institutions.”
  
• Central Bank of Kenya Governor: In a recent statement, the CBK governor noted, “Ensuring the legality and sustainability of public debt is vital for macroeconomic stability and safeguarding the rights of Kenyans.”
  
• Former Treasury Officials: Some have criticized the petition as politically motivated, urging the courts to avoid interfering with government borrowing decisions.
  
• Economists and Analysts: Many support the case’s pursuit of legal clarity but caution about potential short-term economic impacts.

Lessons from Other Countries

Kenya is not alone in confronting issues around public debt legality. Globally, countries like Greece, Argentina, and Jamaica have faced similar controversies, with courts or parliaments reviewing debt legitimacy and restructuring terms.

In Africa, South Africa and Nigeria have grappled with managing rising debt amid economic headwinds, emphasizing the importance of strong governance frameworks.

Conclusion: A Defining Moment for Kenya’s Democracy and Economy

The Central Bank of Kenya’s decision to back Senator Omtatah’s constitutional petition marks a watershed moment in the country’s quest for fiscal accountability and justice. As Kenya’s courts prepare to consider the case, the eyes of the nation—and indeed, Africa—are watching closely.

This legal battle is about more than just numbers on a ledger; it is about the fundamental principles of transparency, rule of law, and safeguarding Kenya’s economic sovereignty for future generations.

The outcome could reshape Kenya’s economic landscape and inspire other nations to hold their leaders accountable in managing public resources responsibly.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

4th June, 2025