News
EADB in yet another huge loss
Shaky ground: Litigation liabilities capable of sinking the institution, which has had worst impact on investor confidence. Picture: Morgan Mbabazi
Posted Monday, November 30 2009 at 00:00
Since The EastAfrican exposed EADB’s financial woes, management has always shied away from explaining what was going on at the Bank, and what strategies they had in place to resuscitate the ailing lender.
EADB has three main sources of funds for its operations namely; contributions from its owners who are the EAC Member States, investment from institutional investors such as the AfDB, and collections from loans already given out.
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THE $100m AWARD ‘TIME BOMB’
Early this year, the Appellate Court of Tanzania ruled that the East African development Bank pay a businessman, John Lamba, a staggering $100 million after a legal battle lasting more than a decade.
Mr Lamba was granted a loan of SDR (Special Drawing Rights) equivalent of $3 million to purchase machinery for a business tender.
The bank lent the businessman $4 million in 1994 but terminated the loan midway after what it claimed to be unclear use of the money and its recovery.
At one point, Mr Lamba was not repaying the loan and the bank sought court redress.
The businessman countersued the bank and was awarded $3 million.
The bank noted in its annual report of 2007 that it was involved in a court case challenging an award of $61 million against it. The case had been ongoing since 1994.
The bank then filed a petition to set aside the award but this was dismissed by the High Court in June 2007 on the grounds of limitation.
Legal experts at the East African Law Society urged the EAC member states who own the Bank not to pay the money.
If the court’s judgment is maintained and the award given, the case has the potential of bringing down the bank given its poor financial health.
The Bank, which plays the threefold role of lender, advisor and development partner of the member-states of the East African Community, provides a range of products and services tailor-made for the region’s development.
The currency value of the SDR is determined by summing the values in US dollars, based on market exchange rates, of a basket of major currencies — the dollar, the euro, the Japanese yen, and the pound sterling.
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