Kenya’s repayments towards Standard Gauge Railway (SGR) line-related loans will more than double in the financial year starting July on the back of increased payment of principal sums to Chinese lender for the mega infrastructure project.
The Treasury projects debt repayments to Exim Bank of China will shoot to Sh96.70 billion in the next financial year, a 126.61 per cent surge from revised Sh42.67 billion budgeted for this year.
The jump in debt obligations to the lender is partly due to Sh30.48 billion downward revision in the initial budget that had been approved in June 2020.
Kenya obtained debt relief from a number of bilateral lenders, including China, to cushion against revenue shocks emanating from Covid-19 knocks.
Redemptions to the Chinese lender will climb to Sh73.42 billion from Sh21.23 billion this year, while interest obligations will rise a modest 8.55 per cent to Sh23.28 billion from Sh21.44 billion, Treasury data tabled in the National Assembly show.
The deal by Exim Bank of China to fund 90 per cent of the $3.6 billion (about Sh385 billion under prevailing exchange rate), 485-kilometre Mombasa-Nairobi SGR line saw Beijing overtake Tokyo as Kenya's largest bilateral lender.
This followed an agreement signed with Beijing in May 2014 to borrow $3.233 billion (Sh324.01 billion) from the state-run bank, comprising $1.633 billion commercial loan and $1.6 billion concessional credit to build the first phase of the modern railway.
The cash, which was disbursed in phases, has an interest of 3.6 percentage points above the six-month average of London Inter-Bank Offered Rate (Libor) which serves as an international benchmark.
The loan for the first phase is to be repaid in repaid in 15 years with a grace period of five years.
Kenya later tapped $1.482 billion (Sh158.54 billion) debt in December 2015 to link the SGR line from Nairobi to Suswa near Naivasha.
The loan for the second phase of the SGR line — whose five-year grace period lapsed last December paving way for onset of payment of principal sums from January 2021 — will be cleared in 30 semi-annual payments in the next 14 years.
Repayments to the China’s Exim Bank will account for 24.15 per cent of the Sh400.46 billion external debt obligations for the next financial year ending June 2022.
President Kenyatta’s administration has largely contracted concessional and semi-concessional loans from China since 2014 largely to build SGR, roads and bridges.
China’s influence on the country’s infrastructure development started in earnest with construction of the Thika Superhighway between January 2009 and November 2012 at a cost of nearly Sh32 billion during President Mwai Kibaki's last term in office.