- Expenditure data released this week by the Treasury shows that the amount repaid to Chinese lenders has increased 135.15 percent compared to Sh31.25 billion in the year ending June 2021.
- The cash amount was transferred to the lenders – Exim Bank of China and China Development Bank – in two batches of 43.62 billion sh. in the third quarter of the current financial year.
- The repayments to Chinese lenders accounted for 81.4 percent of the 90.26 billion Sh 90.26 billion that the Treasury spent on servicing bilateral debt in the nine-month period to March.
Kenya’s debt repayments on China-funded infrastructure projects have more than doubled to a record 73.48 billion Sh 73.48 billion this fiscal year amid increased approval of principal amounts after the expiration of the grace period.
Expenditure data released this week by the Treasury shows that the amount repaid to Chinese lenders has increased 135.15 percent compared to Sh31.25 billion in the year ending June 2021, when a moratorium on Covid-19 shocks was in place.
The cash amount was transferred to the lenders – Exim Bank of China and China Development Bank – in two batches of 43.62 billion sh. in the third quarter of the current fiscal year (around January) and 29.86 billion sh. in July 2021.
The repayments to Chinese lenders accounted for 81.4 percent of the 90.26 billion Sh 90.26 billion that the Treasury spent on servicing bilateral debt in the nine-month period to March, according to preliminary data.
Kenya had sought to rescue the bulk of the cash owed to China in the first half of the current fiscal year, but Beijing rejected its application for deferral of debt obligations for six months until last December.
Chinese lenders, particularly Exim Bank, were unhappy with Kenya’s application to extend the Covid-induced debt service suspension program of the rich nations, leading to delays in disbursements to active projects financed by Chinese financiers, mainly in the electricity transmission sub-sector.
That prompted Nairobi to drop its request to Beijing for “mutual benefit,” Haran Sirima, the director general of the public debt management office at the Ministry of Finance, said in an earlier response to Business Daily queries, where he chose to look for other sources of revenue to fill. the resulting gap in the budget.
China tried to negotiate its debt relief agreements with poor countries separate from the G20 countries – including France, Italy, Japan, Spain, the United States, Belgium, Germany and the Republic of Korea – but applied the same terms.
This ensured that Beijing reserved the right to determine which loans and the amount would be subject to the moratorium on repayment.
The terms of Beijing’s lending agreements with developing countries are usually secret and require borrowing nations such as Kenya to prioritize repayment to Chinese state-owned banks over other creditors, according to a data set by AidData – a US research laboratory at the College of William & Mary.
The Ministry of Finance’s report shows that China’s total debt to Kenya fell to $ 6.84 billion (about Sh793 billion) in March from $ 6.95 billion (about Sh806 billion 796.37 billion) in December last year, the lowest since $ 6.73 billion (Sh780 billion) in December 2020.
President Uhuru Kenyatta’s administration has largely borrowed from China since 2014 to build roads, bridges, power plants and the standard tramway (SGR). This started after Kenya became a low-middle-income economy, locking her out of very lenient loans from development lenders such as the World Bank Group.
Most of China’s loans to Kenya were channeled through Exim Bank, which in May 2014 cashed the mega deal to finance 90 percent of the $ 3.6 billion (approximately Sh417 billion below current exchange rate) 485 kilometers of Mombasa-Nairobi SGR. This prompted Beijing to overtake Tokyo as Kenya’s largest bilateral lender.
In the budget estimates for the coming financial year from July, the Ministry of Finance has listed Japan as the largest source of bilateral loans and subsidies, skipping China, which has been the largest financier for almost a decade.
Beijing is expected to lend Kenya Sh29.46 billion for fiscal year 2022/23, a sharp drop from Sh140.03 billion in the 2015/16 budget. This is the second year in a row that China will follow Japan in bilateral loans, after committing 21.25 billion sh. in the current year, ending in June, against Tokyo’s 36.49 billion sh., according to the Ministry of Finance.
This comes on the back of President Xi Jinping revealing last November during the Eighth Ministerial Conference of the China-Africa Cooperation Forum (FOCAC) that China would reduce investment in Africa by a third in three years.
Sir. Xi pledged $ 40 billion (Sh4.6 trillion) to Africa, down 33.33 percent from $ 60 billion (Sh6.9 trillion) in the last two FOCAC summits, which take place every three years.
“I think the Chinese debt has reached, or it is close to falling the yield, if the large public spending in Kenya, for example, is something to go after,” said Churchill Ogutu, an economist at IC Asset Managers, an African focused investment bank.
“As such, I see China being selective in terms of projects it finances in the future.”
The Ministry of Finance’s budget estimate shows that a little more than half (15.62 billion Shh) of the expected loans from China in the coming year will be injected into projects under the Ministry of Energy – mainly power transmission infrastructure.
Other beneficiaries are the Infrastructure Department [largely roads] which will receive Sh5.73 billion, the Ministry of ICT (Sh4.02 billion) and the Ministry of Water and Sanitation (Sh4.10 billion).