China has extended its position as Kenya’s biggest lender, with the Sh534 billion it had disbursed in loans by the end of March raising its share of Kenya’s bilateral debt to 72 per cent.
The Chinese debt has expanded by Sh453 billion since 2014, mainly on account of loans Kenya procured to build the standard gauge railway.
Latest Treasury data shows that by the end of March, Kenya’s total outstanding bilateral debt stood at Sh741 billion, having risen by Sh71.2 billion from July 2017 when the fiscal year began.
The Treasury has in recent months been under pressure to slow down the pace at which Kenya’s public debt is growing. Global financial institutions such as the IMF have asked Nairobi to embark on fiscal consolidation to arrest the growth of debt.
Rapid growth of Chinese debt has helped push Kenya’s total stock of external debt to Sh2.52 trillion or just over half of Kenya’s total public debt of Sh5.1 trillion.
Meanwhile, France has now risen to become the second biggest bilateral lender to Kenya that had lent Nairobi Sh64.8 billion by end of March. Japan, which was for a long time Kenya’s top bilateral lender, has slipped to third position with outstanding loans of Sh51 billion, after the stock of its debt rose from Sh46.9 billion in June 2017.
Five years ago, Japanese loans to Kenya stood at Sh107.4 billion, and the decline in the intervening period as Chinese debt grew is being seen as indicative of the shift in economic influence in Africa between the two Asian economic giants.
Kenya also owes Germany Sh26.1 billion, up from Sh23.55 billion in June 2017, and Belgium Sh10.8 billion, up from Sh9.9 billion in the same period.
Questions over sustainability have risen, especially after Nairobi raised its appetite for commercial debt such as the Eurobonds and syndicated loans that carry a higher interest rate compared to credit from traditional lenders such as the World Bank.
The rise in bilateral and commercial debt is in contrast with that from multilateral lenders like the World Bank, the European Investment Bank and the Asian Development bank (ADB), which fell by Sh3.7 billion to Sh758.4 billion in the nine months to March 2018.
This was mainly due to a fall in money owed to the World Bank — Kenya’s biggest multilateral lender — from Sh522 billion to Sh509 billion. The loans from the ADB rose by Sh9 billion to Sh206.3 billion, while outstanding debt to the IMF fell from Sh77.6 billion to Sh73.8 billion in the period.