Economy

China takes up 87pc of Kenya interest payment

sgr

SGR train at the Nairobi terminus. The deal to fund the first phase of the rail saw Beijing overtake Tokyo as Kenya’s largest bilateral lender. FILE PHOTO | NMG

BDgeneric_logo

Summary

  • In the year through June, 2019, interest payments to Chinese State-owned banks accounted for Sh29.21 billion of the Sh33.54 billion total interest spend on bilateral loans.
  • Kenya contracted additional $929.46 million (Sh96.53 billion under prevailing exchange rates), raising Beijing’s stock of debt to Kenya to $6.46 billion (Sh671.15 billion) in June 2019 compared with a year ago.

Beijing gobbled up 87.08 percent of the cash Kenya spent on interest payment to its bilateral lenders in the year through June, 2019, compared with 81 percent a year earlier, new data shows.

Treasury statistics, that partly reflect the cost of loans to taxpayers, show interest payments to Chinese State-owned banks accounted for Sh29.21 billion of the Sh33.54 billion total interest spend on bilateral loans.

This was, however, 7.5 percent growth over Sh27.17 billion a year earlier.

Kenya contracted additional $929.46 million (Sh96.53 billion under prevailing exchange rates), raising Beijing’s stock of debt to Kenya to $6.46 billion (Sh671.15 billion) in June 2019 compared with a year ago.

China accounted for 66.38 percent of Kenya’s bilateral debt, underlining Nairobi’s over-reliance on China to fund infrastructure development.

President Uhuru Kenyatta’s administration has largely contracted debt from China since 2014 to mostly build new roads, standard gauge railway (SGR) 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 the last term of President Mwai Kibaki.

The deal to fund the first phase of the SGR, Kenya’s single largest infrastructure project by cost since independence, saw Beijing overtake Tokyo as Kenya’s largest bilateral lender.

The East Asian country, world’s second largest economy after the US, has since become the single largest creditor to Kenya, accounting for 11.55 percent of Sh5.81 trillion total debt as at June 2019.

Western powers have recently raised concerns Chinese loans were pushing African nations such as Kenya deeper into unsustainable debt, eating up a significant chunk of their revenues and limiting their investments in capital projects that generate jobs for unemployed graduate youth.

“China, as it becomes a major investor, donor and creditor country, will have to do all others have done: accept that you have to write off some of your debt,” Mukhisa Kituyi, the United Nations Conference on Trade and Development (Unctad) secretary-general, told a forum in Nairobi on September 12.

“I think there has to be discourse that China has to take the responsibility that others have taken. You have to work out mechanism, you have to forgive some of the debt you gave on unsustainable provisions.”

Kenya’s bilateral debt jumped by a third to nearly $9.74 billion (Sh1.01 trillion) in the year ended June, with loans from Japan surging 162 percent to $1.32 billion (Sh137.29 billion) compared with a year earlier.