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How Kenya Was Entrapped Into A Ksh650 Billion Chinese Debt

Kenyan President Uhuru Kenyatta (left) with the Chinese President Xi Jinping (right)
Kenyan President Uhuru Kenyatta (left) with the Chinese President Xi Jinping (right). [PHOTO/ COURTESY]

Kenya owes China at least Ksh650 billion to China, most of which was acquired during President Uhuru Kenyatta’s tenure.

The debt represents a 10 percent of Kenya’s public debt, which has ballooned to over Ksh6.6 trillion in the last few years of Jubilee regime.

Kenya’s external debt rose four times in the last ten years, only competing with Ethiopia whose debt rose five times.

A talk of China taking over Kenya’s Mombasa Port and the Inland Container Deport (ICD) has been gaining traction in the last few days, in case the country fails to repay the debt.

Mombasa is East Africa’s largest and most valuable port serving Burundi, Congo, Rwanda, South Sudan and Uganda.

Despite fears that Kenya could default on the loan with falling tax collections and slimming chances of getting more external loans, the government is yet to renegotiate loan terms.

But how did Kenya get itself there?

In 2014, the country signed a $3.2 billion (Ksh327 billion) to build the Standard Gauge Railway (SGR) from Mombasa to Nairobi. The project was overly overpriced, and according to former Prime Minister Raila Odinga the initial plans put the cost at approximately Ksh200 billion. This means that when the Jubilee regime took over, the project cost was inflated by over 50 percent.

Read: China Debt Rises As SGR Records Sh21 Billion Loss

The project was expected to break even almost immediately, but five years later the project has been recording losses year-on-year. So far, the project has made a cumulative loss of Ksh21.68 billion in just three years.

To try and make things better, the government has been trying to force all traders to transport their cargo via SGR from Mombasa to Nairobi, something that is yet to work.

The Port of Mombasa is said to have been placed as a collateral, reports which President Uhuru Kenyatta refuted. The government has however never made public the contract between Kenya and China.

Read: How Mombasa Port Has Been Illegally Handed To Private Company Associated With Governor Joho

If true, Kenya could be forced to go he Sri Lanka way. In 2017, Sri Lanka handed over the strategic Port of Hambantota on the country’s southern coast to China on a 99-year lease when it had trouble repaying its loan for the port.

Already, China is running the SGR, but the line is not making any profits hence the Chinese lenders might demand something else that is profitable.

The government also signed a loan facility to extend the SGR to Naivasha at a cost of Ksh150 billion, further increasing the Chinese debt.

Other loans to Kenya by China have been advanced to government parastatals for certain projects.

Financial Times reports that China has transferred nearly $150 billion (Ksh15 trillion) to governments and state-owned firms in Africa alone.

Read: China Could Soon Set Up Military Base In Kenya – U.S. Report

Already, the World Bank has warned Kenya and Ethiopia are among the most indebted countries in the world, and soon Kenya might not be able to manage its public debt.

Beijing is already the world’s largest non-commercial lender, beating the International Monetary Fund and the World Bank. It is reported that China’s interest payments represent 87 per cent of the cash used to service debt expenditure in 2019

The case in Kenya and some African countries is being replicated in South Asian countries, where China fund multi-billion dollar projects that mostly serve its interests.

China’s share of bilateral debt owed by the world’s poorest countries to members of the G20 has risen from 45 percent five years ago to 63 percent.

China’s external loans and trade credits stand at $1.6 trillion (Ksh160 trillion), or close to 2 percent of global gross domestic product (GDP).

Below is a list showing China’s loan status with some Asian countries:-

China loan to Asia

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Written by Francis Muli

Senior reporter at Kahawa Tungu, Muli has a passion for human interest stories. Believes in unearthing societal rots that have been hidden from the public eye.
Follow me on Twitter @FmuliKE. Email francis@kahawatungu.com

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