Kenya’s debt to China hits Sh797bn in May

public debt

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

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Kenya’s debt stock to China shot up by Sh10.8 billion in May, the fastest month-on-month growth since January on the back of increased clearance of principal sums.

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

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

China’s stock has eased 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 Sh20.6 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.

Pressure on taxpayers

Their concern was sparked by a situation in which the loans increased amid opaque repayment terms that piled 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, won the lion’s share of Kenya’s mega projects that include at least two railways, two ports, and several road projects.

CRBC’s most notable project is the standard gauge railway, whose commercial viability has been the subject of intense scrutiny. The firm recently completed the Nairobi Expressway estimated to cost Sh88 billion investment under the public-private partnership model.

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

Budget deficit

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

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.