Kenya moves closer into China orbit by joining Asian Bank

Chinese President Xi Jinping applauds after unveiling a sculpture during the opening ceremony of the Asian Infrastructure Investment Bank (AIIB) in Beijing on January 16, 2016. PHOTO | POOL

Kenya has inched closer to joining the China-led Asia Infrastructure Investment Bank (AIIB) after the Cabinet on Monday approved the country’s subscription to the membership of the institution that was established to challenge the US-dominated IMF and World Bank.

The move is part of Kenya Kwanza administration’s agenda of tapping into the ubiquitous green financing, having already benefited from similar financing from the International Monetary Fund (IMF), a global lender dominated by the US and its allies.

“As part of the administration’s agenda on enhancing regional cooperation and connectivity through the green economy, the meeting considered and approved Kenya’s subscription to the membership of Asian Infrastructure Investment Bank (AIIB),” reads the Cabinet dispatch.

“The (AIIB) Bank seeks to foster regional cooperation and connectivity by financing sustainable and green infrastructure projects that are technology-enabled,” it added.

Analysts reckon that China launched the AIIB in 2016 as part of its One Belt, One Road initiative aimed at linking the economies of Asia, Europe and Africa with highways, rail lines and power plants. Kenya is a member of this initiative.

China, the second largest economy, started the AIIB to challenge the US-dominated IMF and World Bank after the US refused to give China more influence in these Washington-based global lenders.

The World Bank and IMF lend to developing countries such as Kenya, but on certain conditions known as the Washington Consensus — a set of policies designed to promote the use of private markets, protect the environment, protect human and workers' rights, and foster non-corruption in government, among other values.

Other international finance institutions in which Kenya is a member include World Bank, IMF, and the African Development Bank. The World Bank is Kenya’s largest external financier, having extended to the country loans worth $12.4 billion (Sh2 trillion) by the end of September last year.

By the end of last year, Kenya was among the 15 countries that had expressed interest to join the AIIB, which has a total of 109 countries, both from Asia and non-Asia regions.

Other prospective members outside of the Asian region include Nigeria, Senegal, Tanzania, Togo, Mauritania, Djibouti, Bolivia, Venezuela and El Salvador. So far, 13 African countries are members of this international finance institution, but by the end of 2023, only three—Egypt, Rwanda and Cote d’Ivoire—had received funding from AIIB.

In total, African countries have received a total of $1.67 billion from AIIB to finance nine projects in the three countries. However, this is less than three percent of the total lending portfolio for the development bank with a big chunk of the financing going to China, the founder member.

Egypt, with approved funding amounting to $1.27 billion for six projects, is the biggest beneficiary of AIIB’s funding envelope for African countries.

Kenya, which is staring at a major refinancing risk having struggled to issue a Eurobond to retire another that is maturing in June, is keen to widen its financing options.

The country even mulls swapping expensive commercial loan payments with nature conservation investments and issuing bonds in China and Japan as fresh alternatives to the Eurobond market.

“In light of increased cost of financing, the government will continue monitoring the global financial market conditions before accessing the international capital market for any liability management operations,” said the National Treasury in the draft Budget Policy Statement (BPS).