Kenya more than doubles its debt to China

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Kenya more than doubles its debt to China

Kenya’s reimbursement to China soared to one record 73.5 billion shillings this financial year after the expiry of the suspension period for the repayment of the debt. The repayments relate to debts contracted to finance infrastructure projects.

The Treasury released spending data this week showing that Kenya’s debt to China rose by 135% from 31.25 billion shillings, which was paid in the financial year ending June 2021, when Kenya got debt relief to cushion income shocks from COVID-19. epidemic.

Kenya repaid the loan in two tranches of 29.86 billion shillings in July 2021 and 43.62 billion shillings in the third quarter of the current financial year. Provisioning data shows that Chinese lenders received 81.4% of the 90.26 billion shillings allocated for debt repayment in the period ending March.

Kenya’s request to delay payment denied

Initially, Kenya requested to defer payment for the first half of the current fiscal year until December 2021, but China refused. The Exim Bank, in particular, was unconvinced by the request for an extension of the grace period.

According to Director General of the Public Debt Management Office of the National Treasury Haron Sirima, Kenya had to abandon the request and explore other alternatives to meet its needs. revenue goals.

China has entered into agreements (separate from other G20 countries) with Third World countries that had requested debt relief as part of efforts to combat COVID-19. This means that China had the power to decide the types and sizes of loans that would be eligible for relief.

Suspicious terms of Chinese loans

According to the American research laboratory AidData, Chinese loans have generally secret termsin most cases, forcing developing countries to prioritize repaying Chinese lenders over other lenders.

Kenyan President Uhuru Kenyatta has relied heavily on Chinese loans since 2014 to drive his infrastructure agenda. This is after Kenya was classified as a lower-middle-income country in 2014, which made it ineligible to borrow highly concessional loans from the World Bank Group and other development lenders. .

Most of the loans granted to Nairobi by Beijing have been disbursed through the Exim Bank of China. In 2014, Exim Bank financed 90% of the SGR megaproject, which cost $3.68 billion (417 billion shillings).

China to cut funding to Africa

A Treasury report shows that Kenya’s debt to China fell from $6.95 billion in December 2021 to $6.84 billion in March 2022. This marks the lowest figure since December 2020, when it was $6.73 billion.

In its budget projections for the next fiscal year, the Treasury intends to make Japan the first foreign financier in its budget ahead of China. China is only expected to contribute 29.46 billion shillings to Kenya’s 2022/23 budget, which is a considerable drop from 140.3 billion shillings in the 2015/16 financial year.

This follows Chinese President Xi Jinping’s announcement to cut his investment in Africa by a third over the next three years.

About 15.62 shillings of the Chinese loan is expected to finance the electricity transmission infrastructure, which is the responsibility of the Ministry of Energy.

The funds will also benefit the Department of Infrastructure, which will receive 7.73 billion shillings, and the Ministries of ICT and Water and Sanitation, which will receive 4.02 billion shillings and 4.1 billion shillings respectively. .

Photo: Wikipedia Commons

About Nyambura Tabitha

Tabitha Nyambura is a veteran Kenyan journalist with years of experience in digital publishing. It focuses on politics and economics. She worked as a freelance journalist for ten years and continues to bring interesting stories that matter to readers across East Africa. View all posts by Nyambura Tabitha

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