Nairobi: Accumulated Chinese debt pushed Kenya closer to default and Beijing could confiscate Kenyan assets if it could not pay off its debt. Since 2014, Kenya has been taking heavy loans from China for its infrastructure projects such as roads, clean power generation plants and its largest project, the Standard Gauge Railway. According to data from the Central Bank of Kenya, Kenya’s external debt reached US$36.4 billion in June 2022, the Financial Post reported. China, which accounts for about one-third of Kenya’s external debt servicing costs for 2021-22, is the country’s largest foreign creditor after the World Bank. Kenya spent a total of Ksh 117.7 billion (USD 972.7 million) on Chinese debt during this period, of which Ksh24.7 billion (USD 204.1 million) is in interest payments and about Ksh 93 billion (USD 768.5 million) is in redemptions.
As reported by the Financial Post, Kenya’s Treasury projects loan repayment to China’s Exim Bank to USD 800 million in the next fiscal year, an increase of 126.61 per cent from USD 351.7 million revised for 2022. Despite China’s repeated denials of pushing developing Afro-Asian countries into a debt trap, Kenya is the new entrant in the list of defaulting countries. In addition, Chinese banks fined Kenya Ksh1.312 billion (USD 10.8 million) in the year ended June for loan defaults. Kenya defaulted in repayment of Chinese loans taken for the construction of Standard Gauge Railway (SGR).
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The deal to finance the first phase of SGR, Kenya’s single biggest infrastructure project by cost since independence, saw China overtake Japan as Kenya’s largest bilateral lender. But the initial happiness has turned into volatility, the Financial Post reported. The default came a year after Kenya asked bilateral lenders, including China, to extend the loan repayment moratorium by another six months. But lenders, notably China’s Exim Bank, did not consider Kenya’s application for a loan repayment holiday, leading to an impasse that delayed disbursement of projects funded by Chinese loans, the Financial Post reported.