Kenya’s bilateral debt repayments to China for the first quarter have surpassed remittances to foreign commercial lenders for the first time, the latest Treasury filings show.
The rising debt obligations to China, Kenya’s largest bilateral creditor by far, signals the burden of increased clearance of principal sums on taxpayers after the grace period Beijing extended to Nairobi lapsed.
The Treasury wired a record Sh48.53 billion to Chinese lenders in the quarter ended September 2022, a 62.51 percent jump over Sh29.86 billion in the same period last year.
This exceeded the Sh32.38 billion paid to foreign commercial lenders by nearly half, driven by growing principal debt payments to the Exim Bank of China, which funded 90 percent of the standard gauge railway (SGR).
Kenya’s commercial debt portfolio is largely made of Eurobonds and syndicated loans from foreign banks.
Exim Bank initially extended a grace period of five years, which ended in 2019, obligating Kenya to start servicing the principal amount in addition to interest sums.
The Treasury data shows principal payments to China nearly doubled to Sh36.68 billion in the review period from Sh18.70 billion in a similar period in the prior year.
The repayments to Chinese lenders accounted for 87.81 percent of the Sh55.27 billion that the Treasury spent on servicing bilateral debt. The cash is equivalent to nearly half of the Sh103.03 billion total debt servicing cost for the July-September 2022 period, according to the provisional data. The Treasury wires repayments to China two times in a financial year, usually in July and January.
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, according to a dataset compiled by AidData, a research laboratory at the College of William & Mary in the US.
The previous administration of President Uhuru Kenyatta, in which the current Kenyan President William Ruto served as deputy president, largely took loans from China since 2014 to build roads, bridges, power plants and the SGR — the country’s single costliest infrastructure project since independence.
This started after Kenya became a lower-middle income economy following a rebasing exercise, locking her out of highly concessional loans from development lenders such as the World Bank Group.
The bulk of China’s loans to Kenya were channelled through Exim Bank which in May 2014 bagged the mega deal to fund 90 percent of the 485-kilometre Mombasa-Nairobi SGR line whose total is estimated at $3.6 billion (about Sh439.2 billion under prevailing exchange rate).
