Odious Debts Online
January 23, 2006
That Kenya’s external debt needs to be cancelled is long overdue. As noted recently by Cabinet ministers and Prof Jeffery Sachs of the United Nations, this debt is crippling the country to the point that Kenya’s ability to meet the Millennium Development Goals (MDGs) is not just difficult, but it is virtually impossible.
The 2005/06 budget indicates that the Government will spend 22 per cent of its budgetary allocation to service external debts, which is even more than it is spending on education, over three times it is spending on health, and over 10 times it is spending on water.
These are some of the issues that the Government must deal with by 2015 in order to meet the MDGs.
A government report of July 2005 indicated that there are hurdles in meeting these MDGs and only when external debts are cancelled can the State invest in improving the lives of the poor majority.
This may be the initial step towards providing resources to invest in the social sector.
High interest rates
Kenya’s internal/domestic debt is about Sh300 billion, and no attention is being paid to this sum. The Government must drastically reduce borrowing money from the domestic market which has led to two critical results. One is that it has crowded out the private sector and other individuals to access loans. And consequently, interest rates have spiralled to alarmingly high levels.
The public has a role to play in addressing the issue of Government borrowing from the domestic market.
After the cancellation of external debts, there is need to set up a public monitoring mechanism where money “freed” from debt repayments is monitored.
For instance, the Catholic Economic Justice (CEJ), a network of Catholic-affiliated institutions lobbying for debt cancellation or repudiation, has set up a campaign to sensitise Kenyans that once debt is cancelled, they should be in the forefront of ensuring that this freed money is monitored and its usage is evaluated.
We need to open the Public Debt Register to public scrutiny. Last year, a Motion to ensure that this register is brought to the Public Accounts Committee of Parliament was roundly defeated. This would imply that the majority of the MPs today are opposed to the opening of that register leading to speculation that many debts – contracted for and behalf of the people – are odious or illegitimate.
Quoting from the book Odious Debts, Prof Alexander Sack, (a special adviser to UN Secretary General Kofi Annan, heading the Millennium Project), who codified the Doctrine of Illegitimate Debt, stated: “If a despotic power incurs debts not for the needs or in the interest of the State, but to strengthen it’s despotic regime, to repress the population that fights against it – These debts are odious to the indigenous population. This debt is not an obligation for the nation; it is a regime’s debt, a personal debt of the power that has incurred it. When this power falls, that debt consequently falls with the fall of this power.”
That is why if these debts are not cancelled, CEJ says refusing to pay them should be considered. That is, debt repudiation should follow in case the campaign to cancel these external debts is not successful. In this regard, CEJ is requesting Kenyans to petition the government by signing a postcard that states: “Stop using my tax money to continue servicing debts, which have done nothing to improve the quality of my life.”
The CEJ is borrowing from the Catholic Bishops’ Pastoral Letter on the Burden of International Debt released in May 2004, which “demands that all those who have siphoned public funds return them immediately with apologies to the nation.”
To forestall these problems, the Ministry of Finance should provide an annual comprehensive financial report of public income (both loans and tax revenue) and expenditure. In this regard, a legal framework should be formulated, which establishes monitoring mechanisms that would guarantee that the Kenyan people, through the Public Accounts Committee or another organ, approves loans before they are contracted on their behalf.
The writer is a research consultant based in Nairobi.