Kenya’s loan repayments to China tripled in July even as the country was locked out of a debt relief gesture by Beijing owing to its middle-income nation status.
Data by the National Treasury shows that Kenya paid Sh25.75 billion to the Asian giant in July, a three-fold increase from its last Sh8.87billion debt repayment to Beijing in January.
China is Kenya’s largest bilateral lender and the country's second largest external lender after the World Bank. Kenya owed China Sh779 billion as at June, which is 18.1 percent of its Sh4.299 trillion external debt.
This comes as China recently locked Kenya out of a deal that will see Beijing extend debt relief this year after the latter’s elevation to a middle-income country.
China’s debt relief plan will see 17 unnamed African countries classified as least developed nations forgiven of 23 matured interest-free loans.
Kenya is considered a lower middle-income country after attaining the United Nations’ $1,045 (Sh126,138.77) gross domestic product (GDP) per capita threshold.
Nairobi was, however, among beneficiaries of the debt repayment deferment plan by rich countries to poor countries in 2020 to help them recover from the effects of the Covid-19 scourge.
The deferment helped Kenya to divert its scarce resources to more urgent needs including purchase of vaccines, an economic stimulus package and subsidies on commodities to ease the cost of living.
This as 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.
The government paid a total of Sh305.3 billion to external lenders in the year to June 2022 in debt service. Of this, payments of Sh102 billion were made to bilateral lenders, out of which Sh27.3 billion (26.8 percent) of the settlements was interest, while Sh74.7 billion was paid as the principal loan settlement.
However, of the amount China received, Sh22.55 billion went into interest payment alone translating into 30.7 percent, while principal loan payment was Sh50.9 billion (69.3 percent).
Kenya’s debt burden crossed the Sh8.61 trillion mark for the first time in July.
This as the current year’s Sh3.3 trillion budget has a financing hole of Sh862.5 billion, which the Treasury plans to plug through local borrowing of Sh581.7 billion and external borrowing of Sh280.7 billion.
The Parliamentary Budget Office (PBO) indicates that Kenya’s debt stock is projected to hit Sh9.8 trillion by June next year.