Analysing the unlawful loan debate and the project execution crisis looming in Kenya
NAIROBI: FOLLOWING the bold public statements by constitutional lawyer and governance activist Willis Evans Otieno under the slogan
“We Refuse to Pay What’s Unlawful,” public debt in Kenya has once again become a key political and economic issue ahead of the general election scheduled for August 2027.
This lawyer’s argument, which claims that certain loans were contracted improperly and have not led to tangible development projects, has sparked a national debate about the true developmental value of public borrowing, fiscal transparency and accountability.
A fundamental question at the heart of most Kenyans’ debate is how a country can amass substantial debt without clear evidence of economic transformation or the implementation of projects.
The examination of the current situation in Kenya, as all eyes and ears are fixed on the individual who will lead in the upcoming election, shows that claiming certain loans are illegal does not necessarily mean that all borrowing is illegitimate.
Instead, in my observation, critics argue that some debt obligations were undertaken without full parliamentary approval, public involvement, transparency, or proper disclosure, which are essential to constitutional governance frameworks.
In Kenya, borrowing procedures are expected to follow principles of fiscal responsibility, ensuring that loans are allocated according to development priorities and used effectively.
Uncertainty about the legitimacy of repayment obligations arises when legal compliance is questioned. These discussions amongst Kenyans raise broader concerns about institutional accountability, shortcomings in supervision, and debt governance.
One of the most politically sensitive aspects of the debate is the perception that largescale borrowing has not consistently resulted in visible or productive investments.
Despite Kenya’s implementation of numerous infrastructure initiatives over the past decade, including energy expansion and transport corridors, critics contend that some borrowed funds have been used to finance recurrent expenditure rather than capital investment.
Several structural factors can contribute to the disparity between project outcomes and borrowing levels. As an investment and analyst, I require thorough feasibility studies, financial modelling, and risk assessments before loan commitments are made for development initiatives.
Funds may be reallocated to address short-term fiscal pressures or remain inactive if loans are contracted before projects are financially ready.
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This automatically leads to an increase in debt servicing costs without any corresponding economic benefits. For Kenya, the challenges the nation faces in repaying its loans may lead to borrowed funds being allocated to operational expenses, including salaries, subsidies, and debt refinancing.
While these measures might stabilise shortterm fiscal balances, as an economist, I would view such decisions as weakening the long-term development impact.
As a result, the economy experiences what analysts call debt substitution, where borrowing replaces rather than enhances development expenditure.
Before making loan commitments, development initiatives require comprehensive feasibility studies, financial modelling, and risk assessments conducted by an economist and investment analyst.
Funds may be reallocated to address short-term fiscal pressures or remain idle if loans are contracted before the projects are financially prepared.
This automatically results in higher debt servicing costs without any corresponding economic benefits. In my opinion, the result is the macroeconomic consequences of debt without development.
The failure of borrowing to generate productive investments can have severe macroeconomic implications.
One is the increasing burden of debt servicing, in which governments are obligated to allocate a greater proportion of their revenue to principal and interest payments as the amount of debt they hold increases.
This diminishes the fiscal capacity for economic stimulus, infrastructure maintenance, and social services. Two, private sector credit is being crowded out.
The failure to generate productive investment from borrowed funds can affect the banking sector’s liquidity, which can be depleted by excessive domestic borrowing, leading to higher interest rates.
Investment and job creation are hence impeded by higher financing costs and restricted access to credit for businesses, particularly small and medium-sized enterprises (SMEs).
The third risk is currency and investor confidence. Investor sentiment may deteriorate if markets perceive debt levels as unsustainable or inadequately managed.
Exchange rate volatility increases, capital inflows decrease, and sovereign borrowing costs continue to rise.
Therefore, the learned brothers would agree with my assertion that these issues have legal and constitutional implications.
The importance of constitutional compliance in public finance management is emphasised by the debate initiated by Willis Evans Otieno, who contended that public borrowing is not solely an economic decision but also a legal and democratic process.
Failure to follow borrowing procedures can lead to legal action and judicial intervention, delays in project execution, heightened political polarisation, and the decline of public confidence in government institutions.
In serious instances, disputes over the legality of debt may complicate relations with lenders and influence future financing negotiations.
Therefore, the learned brothers would agree with my assertion that these issues have legal and constitutional implications.
The importance of adhering to constitutional principles in public finance management is highlighted by the discussion initiated by esteemed brother Willis Evans Otieno, who contended that public borrowing is not merely an economic decision but also a legal and democratic process.
Failure to follow borrowing procedures can lead to legal action and judicial intervention, delays in project execution, heightened political polarisation, and the decline of public confidence in government institutions.
In serious instances, disputes over the legality of debt may complicate relations with lenders and influence future financing negotiations.
The Kenyan debate offers valuable insights for neighbouring countries pursuing ambitious borrowing-led development strategies, as I am currently observing the situation in Kenya.
To ensure loans generate tangible economic outcomes, it is crucial to establish robust project appraisal frameworks, transparent procurement procedures, and parliamentary oversight mechanisms.
For example, development finance institutions and governments across the region are increasingly adopting results-based financing models, which link loan disbursements to project milestones.
This helps minimise the risk of debt accumulation without creating assets. Several reforms are needed in Kenya, which is currently facing economic challenges, including borrowing.
These reforms are essential to tackle issues related to illicit borrowing and delayed project implementation.
The Kenyan government is obliged to publish detailed loan agreements, utilisation reports, and project performance indicators.
Public access to this information will strengthen investor confidence and enhance accountability.
Furthermore, legislatures should play a greater role in approving financing plans, monitoring disbursements, and evaluating development outcomes.
Furthermore, it is essential to link borrowing with development outcomes. Performance indicators, such as productivity improvements, export expansion, and employment generation, should be incorporated into debt sustainability frameworks.
Kenya faces a cycle of high debt, sluggish growth, and diminishing fiscal credibility if worries about unlawful loans and poor project execution continue.
Nevertheless, the ongoing public discourse also offers an opportunity. Kenya can realise sustainable growth potential and restore confidence by aligning borrowing with strategic investment priorities and strengthening governance systems.
The aim is not to ban borrowing completely, but to make sure that every loan given significantly aids economic transformation.
The controversy over unlawful loans and unimplemented projects by Kenyans, including those learned brothers, highlights deeper structural problems in public finance management.
Policymakers have been compelled to respond to enquiries about transparency, accountability, and development impact due to statements made by individuals such as Willis Evans Otieno, which have increased public scrutiny.
The way forward for Kenya is to strengthen legal compliance, improve the capacity for project execution, and rebuild trust among the government, investors and citizens.
This is the only way in which public borrowing can serve its intended purpose as a catalyst for infrastructure development, industrial expansion, and inclusive prosperity, rather than becoming a source of fiscal strain and social tension.
