The Treasury Building in Nairobi. Statistics show that China is the third largest lender in Kenya. Photo/FILE
What you need to know:
Fresh data by the Treasury shows China received Sh1.05 billion from the Treasury last year in interest and principal loan repayments, making it the third biggest recipient.
Japan, the biggest lender, got Sh6.44 billion while France was third with Sh2.59 billion, according to the latest Quarterly Economic and Budgetary Review by the Treasury.
China’s rise to the world’s second largest economy in the past decade has left it with surplus cash reserves, which it has used to exert influence on developing countries, including Kenya.
China’s quick rise on the lenders ladder is underscored because two years ago it did not feature among the top creditors to Kenya. In the financial year 2009/10, the Treasury classified China among Kenya’s “other lenders.”
China has leaped to the position of Kenya’s third largest lender after Japan and France, underlining the growing influence of the rising Asian giant on the economy.
Fresh data by the Treasury shows China received Sh1.05 billion from the Treasury last year in interest and principal loan repayments, making it the third biggest recipient.
Japan, the biggest lender, got Sh6.44 billion while France was third with Sh2.59 billion, according to the latest Quarterly Economic and Budgetary Review by the Treasury.
China’s rise to the world’s second largest economy in the past decade has left it with surplus cash reserves, which it has used to exert influence on developing countries, including Kenya.
“As the donor economies become big, it means they can afford to lend more to Kenya. This has happened with China whose economy is now much bigger than it was years back. China is now among the richest nations and is in the G-20,” said Henry Rotich, a deputy director of economic affairs at the Treasury.
China’s quick rise on the lenders ladder is underscored because two years ago it did not feature among the top creditors to Kenya.
In the financial year 2009/10, the Treasury classified China among Kenya’s “other lenders.”
The Saudi Fund (the sovereign wealth fund) is also listed among the top seven lenders in 2011/12, having first appeared on the list in the 2010/11 financial year.
President Kibaki went to Saudi Arabia in early 2007 to seek Saudi aid and woo investors to Kenya, highlighting incentives that have been put in place to improve the business climate.
In the financial year ended 2010/11, Belgium was the third largest donor to Kenya receiving repayments amounting to Sh932 million while the Chinese came fourth getting Sh798 million, according to the data from the Treasury.
China is also now among the top sources of Kenya’s imports followed by other Asian countries such as India and Saudi Arabia and United Arab Emirates.
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The Chinese economy is now the second largest in the world after that of the United States having overtaken Japan in 2011.
Mr Rotich pointed the growth of Saudi Arabia has benefited from high global oil prices enabling it to build a substantial sovereign wealth fund that it can lend to other countries.
“Even Kenya could become a lender if the oil discoveries turn out to be in commercial quantities,” said Mr Rotich.
John Mutua, a budget programmes officer at the Institute of Economic Affairs, said Kenya had found that diversifying its sources of funds also improved predictability in national budgeting.
“The Chinese and Saudis have a lot of money to lend. For the Chinese, you can see there is a correlation between the amount of money being lent and the kind of projects they are involved in here in Kenya such as infrastructure,” said Mr Mutua.
He noted that problems in Europe in the past three years or so had caused diversification of sources of revenue critical in order to implement budgeted projects and programmes.
“The types of terms and conditions that our traditional lenders put on aid have been more stringent than those from the Chinese and other from Asia. It seems they are more willing to negotiate,” said Mr Mutua.
