China becomes Kenya’s top creditor following Sh70bn in new loans

The government’s appetite for borrowing seems unlikely to wane any time soon.
Kenyan President at the China International Import Expo
(181103) — SHANGHAI, Nov. 3, 2018 (Xinhua) — Kenyan President Uhuru Kenyatta (1st L) arrives at the Shanghai Pudong International Airport in Shanghai, east China, on Nov. 3, 2018. Kenyatta is here to attend the first China International Import Expo (CIIE) which runs from Nov. 5 to 10. (Xinhua/Fang Zhe) (sxk)

Kenya contracted $704.99 million (Sh70.55 billion) fresh loans from China, helping Beijing regain its position from World Bank Group as the single-largest creditor.

Latest Treasury data shows the stock of debt from China hit $6.2 billion (Sh620.60 billion) as at the end of last year from $5.50 billion in September, consolidating the East Asian country’s influence on Nairobi’s infrastructure projects.
Loans from World Bank’s International Development Association and International Fund for Agricultural Development, which are usually concessional, dipped to $5.48 billion (Sh548.38 billion) last December from $5.61 billion (Sh561.69 billion) three months earlier, relegating them below China.
Gross public debt crossed Sh5.27 trillion last year, the Treasury data further show a 15.27 per cent or Sh698.36 billion growth over a year earlier.

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“The emerging concern is that the government’s appetite for borrowing seems unlikely to wane any time soon and this could eventually push debt towards unsustainable levels,” the Budget Office — a professional unit within the National Assembly that advises MPs on financial, budgetary and economic matters — says in its latest report.
“It is important, therefore, to ensure that money accrued from debt is well utilised and any public investment inefficiencies are effectively addressed to ensure that debt-funded projects yield high economic returns.”

President Uhuru Kenyatta’s administration has largely procured debt from China international capital markets (Eurobond) since 2014 to build much-needed roads, bridges, power plants and the standard gauge railways.
Loans from Beijing, which come on concessional and semi-concessional terms, have seen China race past traditional multilateral creditors such as the Washington-based World Bank.

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Space for Nairobi to borrow through the World Bank’s IDA’s long-term, low-cost credit window for Least Developed Countries has continued to diminish after Kenya upgraded her economy to lower middle-income status in September 2013.
This has seen Kenya increasingly rely on China and Eurobond to raise cash to bridge deficit in the annual budget, partly being driven by shortfalls in revenue.
China’s loans to Kenya between 2014 and 2018 almost tripled, rising by $3.98 billion (Sh398.32 billion) from $2.22 billion (Sh222.27 billion) in December 2014. This amounts to an average of Sh99.57 billion a year in the four-year period.

Beijing accounted for 70.71 per cent of Kenya’s total bilateral debt $8.78 billion (Sh878.45 billion) last December, meaning for every Sh100 loan that Kenya signed with bilateral partners, Sh70 was from China.

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China also accounted for every Sh23 for every Sh100 Kenya owes foreign creditors and every Sh12 for every Sh100 in total public debt. 

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