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Govt agrees to fully pay KES1.4B Anglo Leasing debt

16 May 2014, 08:19

Nairobi - National Treasury Cabinet Secretary Henry Rotich was Thursday authorized to fully settle the controversial KES 1.4 billion Anglo Leasing debt with immediate effect.

This is according to a statement that was written by State House Spokesperson Manoah Esipisu.

Below is part of the statement.

National Treasury Cabinet Secretary Henry Rotich was Thursday authorized to fully settle the controversial KES 1.4 billion Anglo Leasing debt with immediate effect.

This is according to a statement that was written by State House Spokesperson Manoah Esipisu.

Below is part of the statement.


14. The Government’s decision to settle the judgement debts is premised on
     •       (i) protecting Kenya’s economy on account of rising interest rates
occasioned by domestic borrowing due to constrained access to international borrowing

     •       (ii) protecting Kenya’s reputation as a country that meets its
contractual obligations and adheres to the rule of law
     •       (iii) protecting Kenya’s assets abroad, and

      •       (iv) maintaining and improving Kenya’s credit rating currently at B+.

15. Specifically, the following are the risks posed by non-payment of the
judgment debts.

a) Enforcement of judgements/attachment of GOK assets

It is important that the Government honours the court awards to forestall attachment of Government assets abroad.The claimant has applied to international courts seeking to enforce the judgement in both cases and attach Government assets abroad.

The settlement will also protect Kenya’s reputation as a country that meets its contractual obligations and adheres to the rule of law.

b)There is no further recourse to appeal the rulings
The Attorney General as well as an independent international legal firm Dentons of UK, has advised that there is no legal avenue left for the Government apart from settling the payments.

c) Stoppage of the sovereign bond process
This period coincides with the proposed issuance of the first international sovereign bond to finance the Fiscal Year 2013/2014 budget.

The issuance cannot take place unless all obligations related to the court are paid.  The claimants have threatened to have international courts attach the bond proceeds until the judgement debts are settled.

d) Fiscal risk
The stalled bond process means the 2013/2014 budget cannot be implemented and expenditures and services will have to be drastically scaled down.

e) Higher Costs to the economy
It is estimated that the annual costs of non-settlement would be Ksh21 billion, being the cost of higher interest rates on domestic borrowing both for the public and private sectors. Therefore, given that the cost of paying the judgement debts is Ksh1.4 billion, this means that the benefits of settling them outweigh the costs of non-payment by 15 times. In addition, by paying the KSh. 1.4 billion, the Government unlocks the KSh. 130 billion from the sovereign bond.

In addition, a rise in domestic interest rates would lead to credit crunch to the private sector resulting to stymied investment, lower economic growth, increase unemployment and poverty.  This would not help us achieve our Vision 2030 which is predicated on a stable macroeconomic environment.

f) Negative impact on sovereign rating
The negative impact on the Kenyan economy would also adversely affect our rating by such international rating institutions as Standard and Poor’s, Moody’s and Fitch Rating. It would also negatively impact on Government’s access to financing by other creditors including the traditional concessional lenders.

g) Reputational Risk
Stoppage of the bond process will cause a major setback and embarrassment to the Government and transaction advisers. The stoppage would irreparably injure Kenya’s reputation as it prepares to launch its debut bond.  This bad reputation will be difficult to cure in the medium to long term and will affect every Kenyan-based business trying to engage in international commerce. A high premium will always be factored in the prices for such transactions.

h) Interest charges on the judgements
It is also noted that whether Government pays the two judgements or not, interest charges on the judgement debts will continue to accrue as follows.

•       For the First Mercantile case @ US$ 1,413 (Ksh122, 931) per day since
6th December 2012.

•       For the Satspace case @ US$ 1,665 (Ksh 144,855) per day since 20th
December 2013.

This translates to penalty interest of Ksh 96 million per year.


Resolution of the outstanding judgement debts is crucial in order to alleviate the risks to the Kenyan economy.

The Government has exhausted all judicial options to forestall payment of the judgement debts and the
way forward is for the Government to settle to minimize further loss as the outstanding awards continue to accrue interest.

It is therefore imperative that these debts are settled. Government has today, therefore, authorized the Cabinet Secretary, National Treasury, to pay the judgement debts with immediate effect.

Anglo Leasing has been a thorn in the side of Government for a long time.

As Chair of the Public Accounts Committee when he was opposition leader, the President investigated the matter, and he agrees with the views of a majority of the Kenyan people on this.

That’s why it has taken long to make a decision on the current situation. But the President has had to make a painful decision on what is the greater evil: either the money or put the country’s economy at risk.

Bymaking this payment, the President is not legitimizing what he and many Kenyans believe to have been a series of fraudulent transactions.

Therefore, the President has ordered fresh investigations into the cases. Kenya now has a fully constituted Ethics and Anti-Corruption Commission which can and should take this process forward.

There are also other agencies, including parliament that could play a role.

It is now up to these responsible agencies to ensure that Kenyans get restitution. Our institutions failed Kenya in these cases previously.

Kenyans would not welcome further failure in the context of these cases.

Manoah Esipisu,
State House Spokesperson (spokesperson@president.go.ke
,manoah@manoahesipisu.com,  and +254 732 819 160 )
May 15th 2014

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