Kenya’s debt repayments to China over the funding of mega infrastructure projects has more than doubled to Sh73.48 billion this financial year due to increased clearance of principal sums following expiry of the grace period.
National Treasury’s data on expenditure shows that the amount repaid to Chinese lenders has passed 135.15% compared with Sh31.25 billion in the year ended June 2021 when a moratorium was put in place due to Covid-19 shocks.
The bulk was paid through Exim Bank of China and China Development Bank — in two batches of Sh43.62 billion in the third quarter of this fiscal year and Sh29.86 billion, in January and July 2021respectively.
The repayment of Chinese loans accounted for 81.4 % of the Sh90.26 billion that the Treasury used on servicing bilateral debt in the nine-month period to March.
Kenya wanted to save the bulk of the cash that was due to China in the first half of the current financial year, but China rejected its request to defer the debt obligations for six months to last December.
Exim Bank was against Kenya’s request for extension of the Covid-induced debt service suspension programme by the rich nations, leading to delays in disbursements to active projects funded by Chinese lenders largely in the power transmission sub-sector.
Kenya had no option but repay the loans as it opts for other sources of revenue to fill the resultant hole in the budget.
China wanted to negotiate its debt relief deals with poor countries separately from the G20 countries such as France, Italy, Japan, Spain, the US, Belgium, Germany, and the Republic of Korea but applied similar terms.
The move ensured that China reserved the right to decide which loans and the size are subjected to the moratorium in repayment.
China loan deals with developing countries are always secretive and require countries like Kenya to prioritize repayment to Chinese state-owned banks ahead of other creditors.
President Uhuru Kenyatta’s administration has over borrowed from China since 2014 to fund construction of roads, bridges, power plants, and the standard gauge railway (SGR).
This was after Kenya became a lower-middle-income economy, locking her out of highly concessional loans from development lenders like the World Bank Group.
Chinese loans to Kenya were channeled through Exim Bank, which in May 2014 was awarded the mega-deal to fund 90% of the $3.6 billion (Sh417 billion) 485-kilometre Mombasa-Nairobi SGR.
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