China’s loan repayment terms were the steepest among the top five bilateral lenders to Kenya in the year to June 2022, with the value of interest paid to Beijing surpassing a third of the principal debt even as other countries charged much less.
The latest data from Treasury shows that interest payments on loans from China constituted 30.7 per cent of principal debt—the steepest among all bilateral loans settled within the period.
The government paid a total of Sh305.3 billion to external lenders in the year to June 2022 in debt service. The Treasury report does not disclose details of the loan terms, including repayment period, monthly payments, and costs.
Payments to bilateral lender—other countries from which Kenya has borrowed money—constituted Sh102 billion, or just a third of the total payments. The government paid Sh27.3 billion (26.8 per cent) of the settlements to bilateral lenders as interest, while Sh74.7 billion was paid as the principal loan settlement. Of the payments to bilateral lenders, China gobbled up 72 per cent—receiving a total of Sh73.5 billion.
However, of the amount China received, some Sh22.55 billion went into interest payment alone, translating to 30.7 per cent, while principal loan payment was Sh50.9 billion (69.3 per cent).
China’s interest costs were among the most expensive among Kenya’s bilateral lenders and constituted 82.5 per cent of all the interest paid to the 17 bilateral lenders. While total interest paid to bilateral lenders in the year to June was Sh27.3 billion, interest to China alone was Sh22.55 billion.
By the end of June, Kenya owed China a total of Sh804.8 billion, a 5.4 per cent growth from the Sh761 billion owed to the Asian country by end of June 2021. Its interest cost of a third of the total loan means Kenya could pay about Sh250 billion on interest alone, if the situation holds.
Softer interest terms
Loans from other countries, however, attracted softer interest terms.
Italy, which received the second highest amount among bilateral lenders at Sh10.9 billion received interest of Sh1.9 billion or 17.8 per cent, while France which received a total of Sh5.78 billion in debt service, was paid Sh1.5 billion (25.4 per cent).
Germany, another top bilateral lender to Kenya, received a total of Sh2.5 billion out of which Sh396 million (15.8 per cent) was interest. Japan’s debt service of Sh2.6 billion had the least interest cost at 8.8 per cent.
Other small lenders to Kenya included the US, which was paid a total of Sh387 million with an interest of Sh57.55 million (14.9 per cent).
Commercial loans remain the most expensive for Kenya and ate into half of the total loan payments the country made to its commercial lenders.