Kenya’s debt increased to double debt in one year

Expenditure data published this week by the Treasury shows the amount repaid to Chinese lenders has surged by 135.15 per cent compared with KES (Kenyan Shilling) 31.25 billion in the year ended June 2021, Business Daily Africa reported.

The repayments to Chinese lenders accounted for 81.4 per cent of the KES 90.26 billion that the Treasury spent on servicing bilateral debt in the nine-month period through March, according to the provisional data, the report said.

Kenya had sought to save the bulk of the cash that was due to China in the first half of the current financial year, but Beijing rejected its application for deferment of the debt obligations for six months to last December.

Chinese lenders, especially Exim Bank, were uncomfortable with Kenya’s application for extension of the Covid-induced debt service suspension programme by the rich nations, prompting delays in disbursements to active projects funded by Chinese financiers largely in the power transmission sub-sector, the report said.

China sought to negotiate its debt relief deals with poor countries separately from the G20 countries — including France, Italy, Japan, Spain, the US, Belgium, Germany, and the Republic of Korea — but applied the same terms, the report further said.

This ensured Beijing reserved the right to decide which loans and the size will be subjected to the moratorium in repayment.

The terms of Beijing’s loan deals with developing countries are usually secretive and require borrowing nations like Kenya to prioritise repayment to Chinese state-owned banks ahead of other creditors, the report said citing a dataset compiled by AidData — a US research lab at the College of William & Mary.

The Kenyan administration has largely taken loans from China since 2014 to build roads, bridges, power plants, and the standard gauge railway (SGR), the report said, adding that, this started after Kenya became a lower-middle-income economy, locking her out of highly concessional loans from development lenders such as the World Bank Group.

The International Monetary Fund (IMF) persistently warns African and other third-world countries that mounting debts to China are dangerous. It stresses that Chinese creditors create some instability or vulnerabilities.

Recently, World Bank President David Malpass said that China needs to improve its lending practices in the developing world, especially in terms of transparency in the loans it provides.

“China is now one of the world’s big creditor nations, especially in the developing world… in terms of the official credit that has been provided to the 75 low-income countries, China is owed nearly 60 per cent of that credit,” Malpass said.