In months leading to December 2018, Beijing remained the biggest gainer from Kenya’s external debt repayment in comparison to a similar period of the previous year, according to data by its national Treasury, signalling rising concessional and semi-concessional loans injected into Kenya’s infrastructure development.
India and South Korea also posted significant gains in the value of debt repayment by Kenya over the period — defying a general trend of a dip in the value of repayments to other traditional key lenders to Kenya.
Based on the treasury statistics, as more than a fifth of the overall amount Nairobi spent on servicing its external debt was used in six months by China, the Treasury statistics show, it signalled the cost of concessional and semi-concessional loans China being injected into Kenya’s infrastructure development.
Kenya spent nearly Sh15.43 billion on servicing loans from China in the July-December 2018 period, the Treasury says in its latest report, an equivalent of 22.05 percent of the Sh69.45 billion spend on total foreign debt.
Repayments to China have more than doubled from Sh6.3 billion, or 15.41 percent of the total spend on servicing the external debt, in a similar period in 2016 and Sh12.72 billion, or 18.53 percent of the total foreign debt costs, in 2017.
The amount paid to China, Kenya’s largest lender, which comprised Sh12.80 billion interest and Sh2.63 billion principal sum, also accounted for 60.79 percent of the Sh25.37 billion costs on the bilateral debt- making the world’s largest second-largest economy the largest to a single creditor in the review period.
World Bank Group’s International Development Association (IDA), the country’s largest multilateral lender, claims Sh7.42 billion in debt servicing costs compared to Sh8.13 billion in 2017 and Sh7.28 billion in 2016.
There has been no looking back ever since with China’s State-run firms bagging the lion’s share of Kenya’s mega construction projects such as roads and bridges.
“We decry the low yield in public big-ticket capital expenditures, which has further crowded out investment to the more productive sectors,” Genghis Capital analysts say, citing the Mombasa-Nairobi standard gauge railway line, which reportedly posted a loss of nearly Sh10 billion in 2018 — its first year of full operations.
China’s influence on the country’s infrastructure development started in earnest with the 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 by Exim Bank of China to fund 90 percent of the $3.6 billion (Sh363.60 billion), 485-kilometre Mombasa-Nairobi standard gauge railway line — cash that was disbursed in phases — saw Beijing overtake Tokyo as Kenya largest bilateral lender.