Must citizens repay loans taken in their name that never served them? Kenya’s High Court is about to test a century-old doctrine lenders hoped was dead.

By Patricia Adams for the Mero Tribune

In Brief by Probe International

Kenya is putting an old legal idea to the test. The country’s High Court has greenlit a petition challenging roughly $54 billion in public debt amassed under former president Uhuru Kenyatta and current leader William Ruto. Petitioners, led by Senator Okiya Omtatah, say less than 30 percent won proper parliamentary approval. The rest never appeared in appropriation laws, was not tied to real public projects, and was allegedly siphoned offshore. A $7.1 billion Eurobond is singled out as unconstitutional and odious.

Even the Central Bank of Kenya has sided with the petitioners, calling the case a matter of undoubted public importance that could reset how nations treat corrupt sovereign borrowing.

That case rests on the doctrine of odious debt, the subject of economist Patricia Adams’s book and her argument here, published by the Mero Tribune. Formalized by Alexander Nahum Sack in 1927, the test for odious debt is simple: no consent of the governed, no public benefit, and creditors who knew or should have known. History has already applied it.

After the Spanish-American War, writes Adams, the United States refused Cuba’s debts to Spain because the money financed repression. In 1919 Poland was not saddled with German and Prussian colonial loans. In 1923 Chief Justice William Howard Taft rejected loans to Costa Rica’s dictator Federico Tinoco made for personal use. After Saddam Hussein fell, Paris Club creditors wiped out 80 percent of Iraq’s roughly $120 billion in claims rather than face a ruling that most of it bought weapons, palaces, and repression.

Arbitration separating legitimate from illegitimate debts would have shown Iraqis that law can deliver justice, spelled out creditors’ duties, and cut the moral hazard that has long warped international lending, Adams observes.

Unaccountable rulers who borrow in the people’s name, then deliver nothing of value, leave taxes higher, services thinner, and opportunity smaller for people who never authorized the loans. Binding a nation to those debts rewards elites and careless lenders while punishing everyone else. Citizens should not pay that tab, argues Adams.

An explicit odious-debt standard would cut the moral hazard, force lenders to demand transparency and real public use, and leave only legitimate obligations on the books. Lenders who skip the tests assume the risk. The people should not.

Continue to the publisher’s website here to read this commentary in full.