Kenya’s debt pile to China rises by fastest pace in May

public debt

Kenya’s debt to China hits Sh797bn in May 2022.

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Kenya's debt stock to China increased by Sh10.8 billion in May, the fastest month-on-month growth since January on the back of increased clearance of principal sums after the grace period lapsed.

Data from the National Treasury shows the loans increased to Sh796.5 billion in May from Sh785.6 billion in April.

The jump between May and April is equivalent to more than half of the overall Sh18.88billion increase in Kenya’s debt stock to China over the five months to May.

China’s debt has subsided over the past three years with the World Bank and commercial sovereign bonds taking the huge bulk of the country’s public debt.

World Bank’s lending through International Development Association (IDA) grew by 20.6 billion to Sh1.2 trillion, being the largest creditor to Kenya.

Borrowing through the International Sovereign Bond increased by Sh6.85 billion to Sh821.99 billion.

The accumulation of Chinese debt over nearly a decade had caused an uproar among economists and activists as the loans increased while its repayment terms were not made public while piling pressure on taxpayers.

The terms of Beijing’s loan deals with developing countries are usually secretive and require borrowing nations like Kenya to prioritise repayment to Chinese state-owned banks ahead of other creditors, according to a dataset compiled by AidData — a US research lab at the College of William & Mary.

Despite this, the Asian country has especially through China Road and Bridge Corporation (CRBC), a subsidiary of China Communications Construction Company, bagged the lion’s share of Kenya’s mega projects — at least two railways, two ports, and road projects.

The most notable project funded by the Chinese is the standard gauge railway, whose commercial viability has been the subject of intense scrutiny.

The firm recently completed the construction of the Nairobi Expressway estimated to cost Sh88 billion investment under the public-private partnership model.

Total debt stood at 69.1 percent of gross domestic product, according to National Treasury data as the public debt stock was recorded at Sh8.56 trillion.

This increase has been attributed to disbursements and foreign exchange rates movement especially against the dollar with 67.9 percent of the external debt held in US dollar.

Parliament last month increased the public debt ceiling to Sh10 trillion as a stop-gap measure to allow the next government to borrow Sh846 billion to plug the budget deficit in the fiscal year starting July 1.

The lawmakers had raised the debt ceiling to Sh9 trillion from Sh6 trillion previously in October 2019.