Loan repayments to China will triple from July next year as the five-year grace period that Beijing extended to Kenya in May 2014 for SGR funds comes to an end.
Loan repayments to China will more than triple from July next year as the five-year grace period that Beijing extended to Kenya in May 2014 for the standard gauge railway (SGR) funds comes to an end, Treasury data shows.
Nairobi will pay Chinese State-owned lenders nearly Sh82.85 billion in the year starting July next year from Sh26.61 billion in the current year ending June, and Sh36.24 billion the following year from July.
Kenya in May 2014 entered into a deal to borrow $3.233 billion loan (Sh324.01 billion) from China’s Exim Bank, comprised of $1.633 billion commercial loan and $1.6 billion concessional to build a 385km modern railway between Mombasa and Nairobi.
The loan, whose interest is 3.6 percentage points above the six months average of London Inter Bank Offered Rate (Libor) which serves as an international benchmark, is to be repaid in 15 years with a grace period of five years.
Treasury data tabled in the National Assembly last Wednesday shows principal payments to Exim Bank of China — the main SGR financier — will shoot to nearly Sh34.8 billion in the financial year 2019/20 from Sh6.07 billion this fiscal year, and Sh8.39 billion in 2018-19.
Debt redemption to China Development Bank, another key financier of Kenya’s infrastructure projects, will surge to Sh18.27 billion in 2019/20 from Sh757.76 million this year and Sh1.68 billion in the year which starts in July.
President Uhuru Kenyatta’s administration has largely contracted debt from China since 2014 to build much-needed roads, bridges, power plants and the SGR.
This started after Kenya became a lower middle income economy, locking her out of highly concessional loans from development lenders such the World Bank Group.
China’s influence on the country’s infrastructure development, however, 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.
Construction of the Mombasa-Nairobi SGR cost about Sh692 million per kilometre (km), while the $1.5 billion for the extension to Naivasha is estimated at about Sh1.28 billion per km.
Passenger fares on the SGR are set to rise to Sh1,000 a seat, from the promotional Sh700 during the launch last June, to help cover the costs of the SGR line operated by China Communications Construction Company.
Debt repayments (Sh82.85 billion) to Beijing will account for a third of the Sh274.24 billion that Kenyan projects will be due to foreign lenders in 2019-20.
This will rise to nearly Sh95.2 billion in 2020-21 and Sh120.12 billion in 2021-22, assuming the debt obligations to Beijing will remain constant even with contraction of new loans from Beijing, the Treasury data shows.
China’s debt stock to Nairobi has since surged nearly two and a half times to $5.2 billion (Sh521.38 billion) by last December from $2.22 billion (Sh222.60 billion) in January, dethroning the World Bank Group as Kenya’s largest lender.
Consultancy Deloitte said in the Africa Construction Trends Report 2017, released in Nairobi last February , that China was the “most prolific funder of large-scale” projects, building one in four projects in East Africa.