Kenya could unlock Sh2.3 trillion by refusing illegal debt payments- Lawyer Otieno
The Auditor-General’s report shows uncollected taxes have surged to Sh2.3 trillion, more than double the Sh999.6 billion reported last year.
Kenya could instantly free up 2.3 trillion shillings if it stops paying illegal domestic and Euro bond debts, Lawyer Willis Otieno has said.
Speaking on Radio Generation on Tuesday, Otieno said confronting these debts would not only strengthen the economy but also reduce the financial pressure on taxpayers struggling with a strained tax system.
“You know, one thing I must say is this, I agree with Prof (Manyora) to an extent, but we should not fear. What you should first do is divide our debt pockets, because this audience debt is found in different pockets,” Otieno said.
He explained that Kenya’s debt is divided into domestic debt, euro bonds, and international loans, and that the biggest problem lies in domestic and euro bond obligations.
Otieno noted that domestic debt, now nearing Sh6 trillion, includes loans taken illegally by local actors. “If somebody took domestic debt illegally, don’t pay,” he said. He added that euro bonds, which are commercial loans between Kenya and international banks, also involve irregularities.
“The problem is sovereign bonds and domestic bonds. That is where the main problem of Kenya is,” Otieno explained, highlighting that international loans from institutions like the World Bank, IMF, or China ExIm Bank are generally legal and follow strict conditions, making them less risky.
Using Mozambique as an example, Otieno said Kenya could refuse to pay certain euro bonds without international consequences.
“Mozambique took a bond, some $2 billion, just like the Kenya Europa one and they refuse to pay. The court said, don’t pay. Mozambique is still here,” he said, emphasizing that courage is needed to confront financial irregularities.
The warnings come as Kenya faces a mounting tax crisis.
The Auditor-General’s report shows uncollected taxes have surged to Sh2.3 trillion, more than double the Sh999.6 billion reported last year. A significant portion, Sh2.1 trillion, is tied up in arrears, under validation, uncollectable, or awaiting reconciliation.
The report highlights a range of debts, including Sh765.3 billion in legacy system debts, Sh906 million in customs uncollectable debts, and Sh231.6 billion in public sector debts.
Tax appeals stand at Sh391.8 billion, with another Sh138.6 billion tied up in validation processes, while Sh588.5 billion in resolved debts have yet to be updated in taxpayer ledgers.
Arrears, unresolved appeals, and validation delays continue to strain the system, affecting businesses and taxpayers alike.
Otieno said if Kenya tackles illegal domestic and euro bond debts, it could release the Sh2.3 trillion currently used to service these obligations, freeing resources for development projects and easing the burden on citizens.
“With Sh2.3 trillion available to the government, what can’t we do?” he asked.
